Page 4 - GLNG Week 29

GLNG CommEntaRy GLNG
Pakistan’s LNG pickle
Securing additional LNG is at odds with Pakistan’s changeable politics
PoliCy
WHat:
A former pM has been arrested over alleged corruption involving an fsRu.
WHy:
securing energy imports is essential for pakistan and as such, can fall foul of complicated political drivers.
WHat nExt:
lNG demand is rising but changing the rules may deter investors.
Pakistani Prime Minister Imran Khan’s anti-corruption drive has ensnared a leading political rival over allegations relating to the cre- ation of the country’s rst LNG import terminal.
Police and Pakistani Rangers arrested the for- mer prime minister, Shahid Khaqan Abbasi, as his vehicle entered Lahore City on July 18. ey were executing a warrant issued by anti-corruption watchdog National Accountability Bureau (NAB).
NAB has accused Abbasi of violating the Pub- lic Procurement Regulatory Authority (PPRA) rules when he awarded an LNG import and dis- tribution contract to Engro Elengy in 2013. He was serving as petroleum and natural resources minister at the time. Engro chartered Excelerate Energy’s 150,000 cubic metre Exquisite oat- ing storage and regasi cation unit (FSRU) and moored it to an existing chemicals terminal in Port Qasim. Natural gas is sold to state-owned Sui Southern Gas Co. (SSGC).
NAB has accused Abbasi of abusing his posi- tion at the time to force through details that dis- advantaged the Pakistani people.
For example, the watchdog said renting space at Engro’s facility had cost the country an “astro- nomical” PKR27mn ($169,000) per day for 15 years, when an underused liquid petroleum gas (LPG) terminal also at Port Qasim could have been retro tted at a cost of PKR30-40mn ($188,000-250,000). Despite what NAB may believe, an LPG terminal is fundamentally dif- ferent from an FSRU.
NAB has also accused Abbasi of assigning Inter State Gas Systems (ISGS) to oversee the terminal’s creation when that should have been SSGC’s responsibility. ISGS managing director Mobin Saulut, who is also under investigation, has accused Abbasi of spearheading the negoti- ations and has tried to distance himself from the LNG contract’s dra ing and execution.
Saulut said that when Fauji Oil Terminal and Distribution Co. (FOTCO) raised concerns over the new LNG terminal’s location at Engro’s chemical facility to the then prime minister, Nawaz Sharif, it was Abbasi who stepped in to defend the decision. Saulat claims he did not have the experience to weigh up the proposed location, so the decision fell to SSGC’s tech- nical team and board of directors. Sharif was sentenced to 10 years in prison in 2018 a er the Supreme Court disquali ed him from o ce in July 2017 over separate corruption charges.
Abbasi has defended his prominent role in the development of the country’s LNG sector, saying many o cials were afraid of being inves- tigated. “Nobody wanted to do anything, as they were scared of NAB,” Reuters quoted Abbasi as
saying on July 4. “We had good people who stuck their neck out and they’re all su ering today.”
Abbasi’s arrest is arguably part of a much- needed clean-up of Pakistani politics. Trans- parency Internationals’ Corruption Perceptions Index 2018 ranks the country 117 out of 180 countries. Khan’s crusade, however, has also been fairly criticised for only targeting the gov- ernment’s political opponents as well as slowing economic growth.
e construction of the country’s LNG ter- minals helped to shore up a domestic power shortfall that led to frequent blackouts and con- strained economic growth. But decision-making around a new terminal has ground to a halt over the last year, with o cials and civil servants wait- ing to see where the hammer will fall next.
on the rise
Pakistan has two FSRUs, with the second – the BW Integrity – also moored at Port Qasim. ere has been discussion of a third FSRU in the coun- try, potentially starting up in 2020, although this now seems unlikely to occur on time. e Economic Co-ordination Committee (ECC) approved the plan in early July, in recognition of the country’s gas shortages. Talks between com- panies and the government have only made slow progress, amid concerns of competition. Exxon- Mobil had been interested in backing an FSRU plan in the country but dropped out, marking a major setback for expanding its import capacity.
Qatar began supplying LNG to Pakistan in 2016, under a deal that will run until 2031, with Pakistan State Oil. is agreement covers the provision of 3.75mn tonnes per year (tpy). Additional supplies come from Eni and Gunvor, according to the International Group of LNG Importers (GIIGNL).
During 2018, Pakistan received 6.86mn tonnes of LNG, up from 4.62mn tonnes in 2017. Given the country’s gas needs, if more capacity can be secured, there is scope for imports to rise substantially. Wood Mackenzie has forecast LNG demand will grow to 11mn tonnes in 2025 and 17.5mn tonnes in 2035, making “Pakistan the 8th largest global market. ere is also upside to our forecast.”
Pakistan issued a 10-year tender for 240 cargoes in June, closing last week. Reuters said hopeful participants included Eni, PetroChina, Azerbaijan’s SOCAR and Tra gura. O ers will be opened on August 2, with prices disclosed – as part of Khan’s anti-corruption drive. e move is laudable but without more political oversight, plans for increased regas capacity will remain on the sidelines. ™
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w w w . N E W S B A S E . c o m Week 29 25•July•2019