Historic Low LNG Prices Can Help Resolve Pakistan Energy Crisis
LNG spot prices hit a new low of $4 per mmBTU as the supply continues to significantly outstrip demand. It's creating opportunities for Pakistan to get access to large supply of cheap fuel for its power generation.
With softening demand from China and 130 million tons per year (mmpta) of additional LNG supply set to reach market over the next five years, gas research firm Wood Mackenzie sees continuing downward pressure on global LNG spot prices.
“The entire industry is worried because it is hard to tell when China’s demand will pick up again,” said an LNG strategist at a Malaysian energy company who attended the Wood Mackenzie conference in Singapore, according to Wall Street Journal. “Rising demand from smaller countries such as Pakistan, Egypt and Bangladesh is not enough to offset the declining demand from north Asia.”
As recently as two years ago, LNG shipped to big North Asian countries like Japan and Korea sold at around $15 to $16 a million British thermal units. This month, the price has already hit $6.65 a million BTUs, down 12% from September, according to research firm Energy Aspects. It expects prices to fall further in Asia next year, to under $6 per million BTUs, as a wave of new gas supply in countries from the U.S. to Angola to Australia comes on line, according to Wall Street Journal.
Petronet LNG Ltd, India’s biggest importer of liquefied natural gas (LNG), is saving so much money buying the commodity from the spot market that it’s willing to risk penalties for breaking long-term contracts with Qatar.
This is a great opportunity for Pakistan to take advantage of historically low LNG prices to alleviate its severe load-shedding of gas and electricity. Recently, Pakistan has launched its first LNG import terminal in Karachi and started receiving shipments from Qatar. Pakistan has also signed a $2 billion deal with Russians to build a north-south pipeline from Gwadar to Lahore. But the country needs to rapidly build up capacity to handle imports and distribution of significant volumes of LNG needed to resolve its acute long-running energy crisis.
Here's a related video discussion:
http://dai.ly/x3ccasi
Pakistan Local Elections; Indian Hindu... by ViewpointFromOverseas
https://vimeo.com/144586144
Pakistan Local Elections; Indian Hindu Extremism; LNG Pricing; Imran-Reham Split from WBT TV on Vimeo.
https://youtu.be/LZavD-tkReg
Related Links:
Haq's Musings
Pakistan's Twin Energy Crises of Gas and Electricity
Affordable Fuel For Pakistan's Power Generation
Pakistan Shale Oil and Gas Deposits
China-Pakistan Economic Corridor
Blackouts and Bailouts in Energy Rich Pakistan
Pakistanis Suffer Load Shedding While IPPs Profits Surge
With softening demand from China and 130 million tons per year (mmpta) of additional LNG supply set to reach market over the next five years, gas research firm Wood Mackenzie sees continuing downward pressure on global LNG spot prices.
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| LNG Price History Source: WSJ |
“The entire industry is worried because it is hard to tell when China’s demand will pick up again,” said an LNG strategist at a Malaysian energy company who attended the Wood Mackenzie conference in Singapore, according to Wall Street Journal. “Rising demand from smaller countries such as Pakistan, Egypt and Bangladesh is not enough to offset the declining demand from north Asia.”
As recently as two years ago, LNG shipped to big North Asian countries like Japan and Korea sold at around $15 to $16 a million British thermal units. This month, the price has already hit $6.65 a million BTUs, down 12% from September, according to research firm Energy Aspects. It expects prices to fall further in Asia next year, to under $6 per million BTUs, as a wave of new gas supply in countries from the U.S. to Angola to Australia comes on line, according to Wall Street Journal.
Petronet LNG Ltd, India’s biggest importer of liquefied natural gas (LNG), is saving so much money buying the commodity from the spot market that it’s willing to risk penalties for breaking long-term contracts with Qatar.
This is a great opportunity for Pakistan to take advantage of historically low LNG prices to alleviate its severe load-shedding of gas and electricity. Recently, Pakistan has launched its first LNG import terminal in Karachi and started receiving shipments from Qatar. Pakistan has also signed a $2 billion deal with Russians to build a north-south pipeline from Gwadar to Lahore. But the country needs to rapidly build up capacity to handle imports and distribution of significant volumes of LNG needed to resolve its acute long-running energy crisis.
Here's a related video discussion:
http://dai.ly/x3ccasi
Pakistan Local Elections; Indian Hindu... by ViewpointFromOverseas
https://vimeo.com/144586144
Pakistan Local Elections; Indian Hindu Extremism; LNG Pricing; Imran-Reham Split from WBT TV on Vimeo.
https://youtu.be/LZavD-tkReg
Related Links:
Haq's Musings
Pakistan's Twin Energy Crises of Gas and Electricity
Affordable Fuel For Pakistan's Power Generation
Pakistan Shale Oil and Gas Deposits
China-Pakistan Economic Corridor
Blackouts and Bailouts in Energy Rich Pakistan
Pakistanis Suffer Load Shedding While IPPs Profits Surge
Comments
Qatar and Pakistan will sign historical deal for the provision of Liquefied Natural Gas (LNG) in the mid of November and immediately after that the supply of LNG to Pakistan will be started through ships.
The Jang Group has achieved the bullet points of this agreement. According to the agreement the Economic Coordination Committee of the Federal Cabinet will give approval to this 15-year deal for the purchase of LNG from Qatar at its meeting on Thursday (November 5) which will be presided over by Finance Minister Ishaq Dar. Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi will give briefing to the meeting regarding the LNG agreement. He will tell the meeting that Qatar will supply three million ton LNG to Pakistan through 52 ships annually. The price of the LNG will be attached to the price of Brent crude oil.
Qatar will provide 400 million cubic ft natural gas daily to Pakistan which is equal to the present production of Sui gas field. The natural gas made by LNG will be provided to nine IPPS. These nine IPPs will produce approximately 1800MW power daily through LNG.
Besides these nine IPPs the natural gas produced by this LNG will be provided to Nandipur Power Plant from March 2016 and this will decrease 25% per unit cost of production of power in Nandipur.
The natural gas produced by LNG will also be provided to fertilizer factories including Pak-Arab Fertilizer and Daud Hercules Fertilizer which would help them produce Urea fertilizer and Phosphate Urea.
This gas will also be supplied to CNG stations. Pakistan has been importing LNG from different sources including Australia, Nigeria, New Guinea, Spain and Belgium and also from Qatar since March 26, 2015.
The private sector of fertilizer has purchased three ships so far and one ship of LNG has been purchased by owners of the CNG stations.
According to the agreement Qatar will provide four ships of LNG every month. The LNG will be provided to brass and textile industries that are ready to buy LNG. The wheel of industry will start booming through such move. This will also create job opportunities for skilled, unskilled and unemployed manpower. It is also expected that gas loadshedding will decrease greatly for domestic consumers with provision of LNG to other sectors.
DOHA Nov 9 (Reuters) - Pakistan has finalised a $16 billion liquefied natural gas (LNG) deal with supplier Qatar and shipments are expected to begin next month, Pakistani energy minister Shahid Khaqan Abbasi said on Monday.
The amount is 1.5 million tonnes per year, the minister said, adding that the two sides had agreed a price.
The two sides have agreed a price, he said without elaborating.
"We have finalised the deal. The first shipment is expected in December," he said. "We are hopeful for similar deals in the future." - Reuters
LNG is a very expensive option for importing energy. As it comes out of the ground it first has to be cooled to minus 180 degrees centigrade to turn it into liquid form. This is a highly expensive operation. Transport of LNG from one place to another requires specialised ships, which charge high rates. For loading and unloading these ships need special terminals where the liquid gas is turned into ordinary gas for industrial and domestic use before it can be pumped into our gas pipelines. These are prohibitively energy consuming and costly processes.
Besides, there are pipeline losses along the way, not to mention transportation losses and costs. Thus a consignment that costs $8.5/mmBtu in Qatar may well cost a consumer, in say Multan, $11.5/mmBtu after taking into account all the transport costs.
We just need to look at the international index for LNG as we can find for Brent oil. There are a number of international price indices for gas. The Henry Hub in the US currently prices gas at $2.13/mmBtu, the TTF index in France and Holland currently price gas at $5.3/mmBtu in pipeline ex-France. All are considerably lower than the $8.64/mmBtu quoted in the press as import price from Qatar.
Instead of importing LNG, the most economical option would be to rely on gas in Pakistan. Currently our proven reserves are approximately 40 tcf of which some has been consumed. We also have approximately 105 tcf of unconventional shale or tight gas, and this is yet to be explored. Our neighbours Iran (1300 tcf) and Turkmenistan (600 tcf) hold the second and fourth largest gas reserves in the world (Qatar with 900 tcf has the third largest), whereas the Turkmenistan-Afghanistan-Pakistan-India (Tapi) pipeline is still at feasibility stage.
Iran has already extended its pipeline to our border and is offering gas at approximately $3.5/mmbtu to potential investors in Iran. If we add transportation costs it would cost approximately $5.5-6/mmBtu in Punjab as opposed to $11.5/mmBtu for Qatar LNG.
How much more expensive would LNG be? If we take 5,000MW as the additional installed power capacity that would run on gas, the demand for gas as fuel would be approximately 180 million mmBtu per annum. As mentioned above, the difference in cost between pipeline gas from Iran or other sources would be $5.5/mmBtu ($6/mmBtu as opposed to $11.5/mmBtu from LNG – at the power plant). Thus this would add approximately $1 billion per annum to the fuel cost or $20 billion for the lifetime of these projects. This money would be far better used for developing much needed social or physical infrastructure or for improving our security.
Is there an urgent need to sign a long-term sale agreement? Due to faulty design our lone LNG terminal cannot receive (and has not received) any LNG carriers as the approach channel needs to be deepened and widened. This will take almost one year and cost around $100m. Therefore until this is sorted out a long-term purchase agreement cannot be effective. The current ad-hoc arrangement of sending the Floating Storage Regasification Unit (FSRU) to Qatar every two weeks for refilling can easily continue at spot rates as this at best is an interim arrangement.
http://www.thenews.com.pk/Todays-News-9-353221-The-LNG-cost
http://tribune.com.pk/story/1017385/overcoming-shortfall-govt-pursuing-multi-pronged-strategy-to-meet-energy-needs/ …
Spurred by the gas demand growing to over six billion cubic feet per day (cfd) and depleting hydrocarbon resources, the government has adopted a multi-pronged strategy to ease Pakistan’s energy crisis.
It is importing liquefied natural gas (LNG) in addition to pursuing long-term projects such as the Iran-Pakistan (IP) and Turkmenistan-Afghanistan-Pakistan-India (Tapi) gas pipelines.
According to an official source, previous governments too unsuccessfully tried to import LNG. They failed because they adopted an approach where the supplier was supposed to develop an LNG terminal.
“But the present government succeeded in providing the country with its first LNG-based gas within 20 months of coming to power,” he added.
The government pursued a transparent process for developing a terminal and Engro Elengy built the SSGC LNG regasification terminal in a record time – the contract was signed on April 2014 and first gas flow was ensured in March this year.
The source said the government needed to sign five more contracts to import LNG, as currently LNG caters to 20% of the country’s needs. The government plans to build one terminal at Port Qasim and another at Gwadar port to handle over two billion cfd of LNG
On the IP project, the government has done work on its part and is awaiting only relaxation or removal of international sanctions on Iran.
The government has also recently broken ground on the Tapi project, which had lingered on for the last 25 years. According to the official, the first gas flow from Tapi is expected in December 2019.
The government has also awarded several exploration licenses to discover more hydrocarbon resources and augment domestic production which is currently stagnant at four billion cfd.
Pakistan is ready to complete the short final pipeline spur that would enable it to import natural gas from Iran once sanctions are lifted, according to the head of one of Pakistan’s state energy companies.
“In the very near future we expect delegations from the two countries to meet,” said Zahid Muzzafar, the chairman of Oil and Gas Development Company, which is government-controlled, but has publicly traded shares on the Karachi and London exchanges.
“Once we get the right signals from the international community and our own government’s decision we are all set to build that pipeline,” Mr Muzzafar said, referring to the expected lifting of international sanctions related to Iran’s nuclear programme that have restricted its oil and gas exports since 2011. Final clearance is expected this month.
The pipeline spur would run from Pakistan’s port city of Gwadar, where it has nearly completed its first liquefied natural gas (LNG) intake plant, to Iran’s border 80 kilometres away. Pakistan has a rapidly growing need for natural gas and is also building a pipeline from Gwadar to the middle of the country as part of a network of pipelines that will include supply via Turkmenistan–Afghanistan–Pakistan–India Pipeline, or Tapi.
Pakistan has long-term aims to be an energy transit country uch as Turkey, which connects central Asian oil and gas supplies to Europe and the rest of the world via pipelines that include the one that terminates at the Mediterranean port of Ceyhan. Pakistan’s strategy would link supplies in central Asia, including Turkmenistan, as well as Iran – which rivals Russia as the world’s largest holder of gas reserves, to the huge markets in China and India, as well as serving its own growing demand.
Mr Muzzafar said additional supplies from Iran can be linked into the system that is being developed currently, which includes a US$2.5 billion project to complete the LNG terminal at Gwadar and pipeline it 700km to Pakistan’s mid-country, terminating at Nawabasah.
First LNG cargo was bought on the spot market from Qatar. Pakistan has tendered for 60 cargoes over five years. Mr Muzzafar said, and the first successful bidders were Gunvor, a Russian-owned trading house, and Royal Dutch Shell.
The China-Pakistan Economic Corridor, a $46bn multi-pronged mega project, plans to link Gwadar, Khuzdar and other western Pakistan areas via roads, rail and pipelines to Dera Ghazi Khan, Dera Ismail Khan and Peshawar in the east, and onto the western Chinese city of Kashgar, 3,000km away
http://on.wsj.com/1RCOHKZ via @WSJ
Asia represents more than 70% of world-wide demand for LNG, but Wood Mackenzie said demand from the region’s largest buyers dropped in 2015, including a first-ever decline in shipments to China, which dropped more than 1%, after years of double-digit growth. South Korean imports of LNG fell 11% on the year and shipments to Japan, the world’s single largest market, declined 4%, the report said.
That was offset by growing demand from newer importers such as Egypt, Jordan and Pakistan, the report said.
Lower prices for LNG will likely spur increased demand from other markets, including those with under-utilized LNG import capacity, such as the Britain and continental Europe, Mr. Giles said. “New LNG [production] will compete with existing gas pipelines in the European market from suppliers like Norway and Russia,” he said.
Longer-term, lower LNG prices will prompt emerging markets outside of traditional buyers in Asia to build infrastructure needed to import LNG. It can take as little as six months to install a ship-based offshore regasification facility, Mr. Giles said.
http://tribune.com.pk/story/1027664/short-term-lng-supply-shell-to-lose-1b-contract-as-qatar-offers-lower-price/ …
Energy giant Royal Dutch Shell is going to lose a five-year liquefied natural gas (LNG) supply contract worth over $1 billion as a Qatari company has agreed to provide the commodity at a lower price to Pakistan.
Gunvor and Royal Dutch Shell had won supply contracts in response to the two tenders floated by Pakistan State Oil (PSO) a few weeks ago for bringing 120 LNG cargoes over a period of five years.
ECC likely to give green light to multibillion dollar LNG deal
Gunvor offered to bring 60 cargoes at 13.37% of Brent crude price whereas Shell quoted 13.8% of Brent crude price for another 60 cargoes.
During negotiations after the opening of bids, Qatargas agreed to match the price offered by Gunvor, which was the lowest, prompting the government to consider scrapping the contract with Shell and award it to the Qatari company.
This was disclosed in a meeting of the Economic Coordination Committee (ECC) on Wednesday this week, which approved a long-term LNG supply agreement worth $15 billion.
The ECC was told that the government would save a substantial amount by transferring the contract won by Shell to Qatar at a lower price. However, Gunvor’s contract will remain intact.
Long-term LNG supply deal still awaited
In the tenders, nine trading firms including commodities giant Vitol, Glencore, Trafigura, Marubeni and US-based Excelerate Energy had submitted bids but all were rejected.
Owing to the plunge in crude oil prices, Shell is focusing on LNG business in the world market. During the previous Pakistan Peoples Party government too, Shell had tried to strike an LNG deal with Pakistan, but failed due to a controversy over the Mashal LNG project, which landed in the Supreme Court.
Pakistan produces 4 billion cubic feet of natural gas per day (bcfd) against demand for over 6 bcfd. The government considers LNG as a fast-track source to bridge the growing energy shortfall.
The lower price offer on the part of Qatar came after Petroleum and Natural Resources Minister Shahid Khaqan Abbasi visited Doha on January 6 and sought a reduction in the LNG rate. Qatar agreed to match the price offered by Gunvor for the short-term supply contract spread over five years.
Pakistan inks LNG deal worth $16b with Qatar
Earlier, Pakistan and Qatar had finalised a long-term supply deal at 13.9% of Brent crude price. The two sides are going to sign a commercial agreement as the ECC has given the go-ahead. Reports suggested that India had struck an LNG deal with Qatar at the lowest price, but Petroleum Minister Abbasi insisted the Indian price was 20% higher compared to the rate agreed between Islamabad and Doha.
Under the proposed arrangement, the long-term LNG supply contract will be for 15 years, but it will be renegotiated after 10 years. The two sides can end the contract if they fail to develop consensus over the price.
Every three months past price of LNG would be taken to calculate the price with Qatar.
As part of the agreement, PSO will receive 1.5 million tons of LNG from Qatargas in the first year and the annual volume will be enhanced to 3 million tons from the second year.
http://www.economist.com/news/finance-and-economics/21689644-it-will-take-time-fragmented-market-verge-going-global-step?fsrc=scn/tw_ec/step_on_it …
Analysts believe that, as a result, the pricing mechanism for natural gas is on the verge of change, and that a real global market will start to emerge, adding Asian trading hubs to those in America and Europe. This should spur the spread of natural gas, the cleanest fossil fuel and one that should be in the vanguard of the battle against global warming. But producers, who fear any change will lead to a drop in prices, are set to resist. They say long-term oil-linked contracts are still needed to offset the risk of their huge investments in LNG. (Gazprom, a Russian producer, has made the same argument in Europe about pipelines.)
Long-term and cyclical shifts explain why the gap between the two fossil fuels has widened. The LNG trade has grown massively in the past decade (see map). Adrian Lunt of the Singapore Exchange says LNG now rivals iron ore as the world’s second-biggest traded commodity, after oil. In the past 40 years natural gas’s share of the energy mix has grown from 16% to more than 21%. Oil’s has shrunk. Gas generates 22% of the world’s electricity; oil only 4%. It might make more sense to tie the price of natural gas to coal, against which it competes as a power source.
Moreover, during the current decade, the outlook for gas prices has become even more bearish than for oil. Sanford C. Bernstein, a research firm, reckons global LNG supply will increase by about a third over the next three years, pushing overcapacity to about 10%. (There is far less spare capacity in the oil market.) At least $130 billion of this investment in supply is in Australia, which within a few years will overtake Qatar as the world’s largest LNG producer. America will also add to the surplus. Its first, much-delayed LNG exports are due to be shipped from the Gulf Coast in weeks.
Investment in the liquefaction trains, tankers, regasification terminals and other paraphernalia needed to ship natural gas was boosted by a surge in demand from Asia. Japan and South Korea scrambled for LNG after Japan’s Fukushima disaster in 2011 forced them to shut down nuclear reactors. China saw LNG as a way to diversify its energy sources and curb pollution from coal. Last year, however, those countries, which account for more than half of global LNG consumption, unexpectedly slammed on the brakes.
The subsequent supply glut means that the spot price of gas in Asia has plunged. Those buyers who took out long-term oil-indexed contracts when crude was much higher are suffering. Mel Ydreos of the International Gas Union, an industry body, says that Chinese firms saddled with such contracts are urging suppliers to renegotiate them. He notes that a Qatari company recently agreed to renegotiate a long-term contract with an Indian buyer, cutting the price by half.
The drop in Asian prices has brought the cost of natural gas traded in different parts of the world closer to each other. America is an outlier. Thanks to the vast supplies unleashed by the shale revolution, its Henry Hub benchmark is by far the world’s cheapest, at just over $2 per million British thermal units (MBTU). But add liquefaction and transport costs, and American LNG prices rise above $4 per MBTU. In Europe and Asia they are a dollar or two higher. A few years ago the range would have been much wider, from $5 at Henry Hub to $19 in Asia. More homogenous prices are an important step towards a globalised market, says Trevor Sikorski of Energy Aspects, a consultancy.
A 75 percent drop in liquefied natural gas prices since 2014 is just what Pakistan needed. Prime Minister Nawaz Sharif’s government is confident it will help end the nation’s energy crisis by 2018.
In three years, the South Asian nation plans to import as much as 20 million tons of the super-chilled gas annually, according to Pakistan’s Petroleum Minister Shahid Khaqan Abbasi. That’s enough to feed about 66 percent of Pakistan’s power plants that have a total capacity of 23,840 megawatts. A fuel shortage has rendered half the nation’s generators idle.
“The energy crisis will be solved before the government’s term ends in 2018,” Abbasi said in a phone interview. “When a customer comes to us asking for gas, we can say, yes, we will deliver gas to you on this date. Earlier we said there is no gas, goodbye.”
Sharif’s plan to use LNG and build coal-fired electricity plants will help textile, fertilizer and steel producers boost output and spur growth that the nation’s power regulator estimates is 3 percentage points below potential. Outages lasting 18 hours had led to street protests in Karachi as recently as June, while falling natural gas production at home forced companies such as Tuwairqi Steel Mills Ltd. to idle it’s plant.
Pakistan is going all out for LNG “as it’s become more affordable,” Vahaj Ahmed, an analyst at Exotix Partners LLP in Dubai said by phone. “This gives policy makers room to justify why they are going for it. The difference between imported and natural gas is very small now.”
About 60 million cubic feet per day of LNG imports will be reserved for textile companies that have export orders, according to the finance ministry. The industry accounts for about half of Pakistan’s total exports, which declined 14 percent in the six months to Dec. 31. Fuel pumps, which are often shut for days, will benefit from the imports in the nation that was once the world’s largest compressed natural gas market.
LNG for delivery in Northeast Asia has dropped about 75 percent since 2014, according to World Gas Intelligence data compiled by Bloomberg. Spot price of the supercooled gas is likely to trade between $4 and $5 per million British thermal unit over the next four years, Goldman Sachs Group Inc. analysts including Christian Lelong wrote in a report dated Jan. 31.
Pakistan will become one of the world’s top five buyers of LNG should the government’s plan succeed, according to Abbasi. The nation started importing LNG using a floating facility last year. Two more terminals are scheduled to be completed next year, Mobin Saulat, chief executive officer at Inter State Gas Systems told reporters last month. The nation got its first shipment last year.
The world’s top five LNG importers are Japan, South Korea, China, India and Taiwan, according to International Group of Liquefied Natural Gas Importers. Pakistan also separately agreed on a 15-year contract with Qatar.
LNG will improve diversification of Pakistan’s energy needs but its only one part of the equation, Mervyn Tang, lead analyst for Pakistan at Fitch Ratings Ltd. said in an e-mail. “Progress on multiple fronts could help foster a sustainable stable energy environment, with potential positive knock-on effects for private investment and economic growth,” he said.
Qatar Liquefied Gas Co., the world’s biggest producer of liquefied natural gas, signed a 15-year contract to supply Pakistan State Oil Co. with 3.75 million metric tons of fuel annually, the Qatari company said.
The supplier, known as Qatargas, plans to deliver the first cargo in March, the company said Wednesday in an e-mailed statement. Qatargas didn’t disclose the contract’s value. A proposed deal with Qatar for 1.5 million tons of LNG per year was worth $16 billion, Pakistan’s Petroleum Minister Shahid Khaqan Abbasi said during a visit to Doha in November.
Pakistan plans to import as much as 20 million tons of the super-chilled gas annually, enough to feed about 66 percent of Pakistan’s power plants. A fuel shortage has idled half the nation’s generators. A 75 percent drop in LNG prices since 2014 has reduced the cost of the South Asian country’s energy needs.
Qatargas, with annual capacity of 42 million tons, will supply Pakistan State Oil from joint venture plants it operates with ExxonMobil Corp. and Total SA. Pakistan State Oil shares rose 1.7 percent, the most since Feb. 4, to close as the leading gainer by points in Karachi’s benchmark 100 share index.
Talks between Qatargas and Pakistani officials date back to 2012. Pakistan intended to buy 3 million tons of LNG per year, split between long-term and shorter contracts. The country’s state oil company decided to cancel a tender for 60 cargoes of the fuel in January.
As Pakistan blames the sanctions imposed on Iran for delaying gas intake from this country, however a Pakistani official claims there is another reason.
Pakistani Parliamentary Secretary for Petroleum and Natural Resources Shahzadi Umerzadi Tiwana said that Qatar's LNG price is lower than the price of Iran's natural gas. that of Iran.
In particular, she mentioned the recent $16-billion deal with Qatar, saying that Qatari LNG is low priced as compared to gas that Iran would be supplying to Pakistan.
According to Pakistani sources, LNG arriving in any particular month will fetch 13.37% of the preceding three-month average price of a Brent barrel (considering the present Brent price as a proxy, that would equate to $167.5 per 1000 cubic meters).
Comparing the figure with the revenues of Tehran gas deals with Turkey and Iraq, it indicates that Iranian gas wouldn't compete with Qatari LNG on Pakistani market.
In 2014 Iran was exporting gas to Turkey at above $420 per 1000 cubic meters, but the figure plunged to $225 currently due to low oil price. Iran previously said that the price of gas for Iraq would be similar to Turkey.
The price in Qatar-Pakistan's new LNG deal is very low. For instance, Tiwana said that the average price of LNG cargos imported so far by Pakistan State Oil (PSO) is $7.8224/MMBTU (million british thermal units). Converting BTU to cubic meters, then Pakistan imports 1000 cubic meters of gas at $291.
Pakistan said on February 10 that it had signed a 15-year agreement to import up to 3.75 million tons per year of LNG, or more than 14 million cubic meters per day (mcm/d) of natural gas from Qatar.
Iran also has a contract with Islamabad to export 22 mcm/d of gas to this country, while Pakistan should have started gas intake in January 2015, but yet to start construction of pipeline on its territory.
Tiwana didn't touch upon any plan regarding the Iran-Pakistan pipeline, but said that an agreement for laying gas pipeline for bringing LNG from Karachi to Lahore had already been signed between Pakistan and Russia with worth $2 billion, projected to be completed by December 2017. The project doesn't have anything to do with Iranian gas.
On the other hand, China is planning to start the construction of another pipeline from LNG terminals in Gwadar port to power plants in Navvabshah city (Pakistan).
This rout can help the realization of Iran-Pakistan gas deal, because Gwadar port has less than 100 km distance from Iranian borders, but the low Qatari LNG price may discourage Islamabad from such a move.
Engro Corp., owner of Pakistan’s second-biggest fertilizer maker by value, plans to expand its power generation business and build a second liquefied natural gas terminal, betting a revival in economic growth will boost demand for electricity.
The Karachi-based company is looking at the possibility of constructing a 400 to 600 million cubic feet a day LNG terminal, through a partnership, for private sector companies, Chief Executive Officer Khalid Siraj Subhani, 62, said in an interview. It also plans to build a 450 megawatt LNG-fueled power plant for as much as $700 million, he said. Engro is also looking to invest overseas in energy and fertilizer after the firm sells stakes in existing businesses, he said.
“The idea is to keep expanding, there is a strong desire,” Subhani said in Karachi, Pakistan’s commercial capital. “There are so many elements we are working on, how they will materialize it depends, but the shift will happen toward energy.”
Engro is seeking to turn an energy crisis in South Asia’s second-largest economy into an opportunity as the government of Prime Minister Nawaz Sharif pushes to end shortages within two years. The nation is adding power plants with the help of Chinese investment and started importing gas last year with Engro building the nation’s first LNG terminal. Outages lasting 18 hours had led to street protests in Karachi as recently as June, while falling natural gas production at home forced companies to idle it’s plant.
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Engro is also considering investing in a fertilizer plant via a joint venture in North America or Africa, Subhani said. The target region will be identified by the year-end and the company wants to replicate a 72 megawatt power plant that it has already constructed and operate in Nigeria, with another facility planned in Africa’s largest economy and other possible projects in neighboring countries including Benin, he said.
“International projects will be less capital intensive, and rely more on our skills and expertise,” Subhani said. He would like to see its international businesses contribute about 20 percent of total revenue within 9 years.
Engro’s plan to expand abroad could be funded by selling stakes in its food, fertilizer and chemical businesses and the company may be able to raise $693 million at current prices, Danish Ali Kazmi, a senior research analyst at Alfalah Securities Ltd. in Karachi, said on May 23.
The company has also sought approval from the government to export as much as 1 million tons of fertilizer, with India being the most logical market after slowdown at home, according to Subhani.
Dutch dairy company Royal FrieslandCampina NV is conducting due diligence to buy 51 percent stake in Engro Foods Ltd. and ATS Synthetic Pvt. in Engro Polymer and Chemicals Ltd. It is also looking to sell up to 24 percent stake in Engro Fertilizers Ltd.
Engro’s shares rose 1.3 percent to 340.50 rupees, poised for their highest close since Aug. 11, at 10:48 a.m. in Karachi. This year Engro’s shares have risen 22 percent, outperforming the 12 percent gain of Pakistan’s benchmark index, the best performer in Asia after stake sale announcements. That’s despite the company’s 2015 annual 4.7 percent rise in revenue, the slowest rate in seven years.
“Fertilizer business is becoming increasingly more challenging,” said Muhammad Asim, chief investment officer at MCB-Arif Habib Savings & Investments Ltd. that manages 66 billion rupees in stocks and bonds. “Power will provide it that stability and potential to build up further.”
http://energy.economictimes.indiatimes.com/news/oil-and-gas/next-lng-importing-giant-pakistan-readies-for-buying-spree/55198906
Pakistan LNG Ltd has launched a mid- and a long-term tender to purchase a combined 240 shipments of liquefied natural gas (LNG), the company said on its website, as the country emerges to become a major gas importer.
Pakistan, which can only meet around two-thirds of its gas demand, is expected to issue further tenders seeking twice as much supply to fill out remaining capacity at its new import terminal at Port Qasim, in the commercial capital Karachi, according to one Pakistani energy expert.
The mid-term tender covers a period of five years and calls for 60 shipments, while the long-term tender is for 15 years and 180 cargoes, according to information presented in the tender documents released on the company's website on Tuesday.
Suppliers must submit bids by Dec. 20.
Pakistan has ploughed billions of dollars into LNG infrastructure, including the construction of a second LNG import terminal and pipelines linking Karachi with Lahore in the Punjab region, the nation's industrial heartland.
The current crop of tenders are a small part of Pakistan's projected demand as the country works to bring two more import terminals online within the next couple of years, making it a potent force in global gas markets.
The country first began buying LNG last year and has already contracted supplies from trading firm Gunvor and Qatargas, the world's biggest LNG producer.
Cheap gas is tempting out new importers from the Middle East to Africa and Asia, helping stave off a deeper price rout hurting producers' bottom lines.
Cheaper than fuel oil and cleaner-burning than coal, LNG suits emerging economies racing to bridge electricity shortfalls and support growth on tight budgets.
The Port Qasim LNG terminal, which is due to go online in mid-2017, has a capacity of 600,000 million cubic feet per day.
"This tender is for 200 million cubic feet. That means another 400 million will need to be tendered out soon," said the industry source.
A Pakistan LNG official in September said the country was working on commercial as well as government-to-government LNG deals.
http://pakobserver.net/3600-mw-electricity-added-system-next-month-ahsan/
Minister for Planning, Development and Reforms, Ahsan Iqbal on Monday said some 3,600 megawatt (MW) electricity would be added to the national grid by next month, which would help reduce energy shortfall in the country.
Addressing a press conference here, he said total 10,000 MW electricity would be added to the grid by May 2018 bridging total gap in demand and supply.
He said the Pakistan Muslim League-Nawaz (PML-N) government had made record investment in the energy sector. Such investment had not been seen in the sector for the last 15 years and production of only 16,000 megawatt electricity was made possible during 66 years. After completion of projects, uninterrupted power supply would be available, which would start a new of era of development in industry, agriculture and services sectors, he added.
Responding to the criticism that the present government could not manage to overcome the energy crisis despite lapse of four years, the minister said energy projects took three to four years to complete. The projects initiated by the PML-N government were near completion and would soon start commercial operations, he added.
He said since the PML-N government came into power, the economic indicators were on the upward trajectory. “Economic growth has gone up to over 5 per cent in 2016 from 3.7 per cent in 2013, inflation rate has come down and industrial growth rate is improving,” he added.
He said the government was focusing on manufacturing high cost commodities instead of low cost ones, therefore, during last three years the export of former had increased.
To a question, he said though the public debt had increased, yet the debt to GDP (gross domestic product) ratio decreased to 60.5 per cent in December 2016 against 62.4 per cent in December 2015.
The minister said the opponents of China Pakistan Economic Corridor (CPEC) were trying to mislead the people that the project would increase the public debt and damage the local industry. In fact, it would help strengthen the country’s industrial sector, he added.
“Huge number of employment opportunities will be created for the local people as Chinese industries are being shifted to Pakistan,”, he said, adding that the Pakistani industry would also become more competitive.
He said due to the CPEC, Pakistan’s economy was now shifting from low cost agriculture industry to high value industrialization. Major development projects, which had been pending for decades, were now at the completion stage, he added.
He said the government had completed the long awaited N-85 connecting Quetta with Gwadar. It would construct over 1,000 kilometer roads across the Balochistan province, he added.
It was the current government that made the long awaited Diamir Bhasha Dam project a reality as its ground breaking was going to be held in a few months, he added.
Ahsan Iqbal rebutted an allegation levelled by scientist Dr Samar Mubarak against the government of fixing tariff rate of Rs 24 per unit of electricity produced from Thar Coal. The traiff was fixed at only Rs 8.5 per unit, he added.—APP
Pakistan set to overcome energy crisis in six months: Abbasi
https://tribune.com.pk/story/1411718/pakistan-set-overcome-energy-crisis-six-months-abbasi/
Pakistan is poised to overcome the chronic energy crisis in the next six months as it doubles the import of liquid natural gas (LNG) and removes the deficit in power production, said Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi on Tuesday.
“The second LNG import terminal would become operational in two months,” Abbasi said at the rebranding of a Pakistan State Oil’s (PSO) outlet in Karachi.
The new import terminal, Pakistan LNG Terminal Limited at Port Qasim by Pakistan GasPort consortium, would add 600 million cubic feet per day (mmcfd).
Engro’s Elengy Terminal Pakistan Limited at Port Qasim has already been importing 600mmcfd in the country from Qatargas.
The minister said import of LNG would continue to increase to meet rising domestic demand going forward.
“The domestic demand has shot up to 7bcfd (billion cubic feet per day) against local production at 4bcfd,” he said.
“Local production has remained stagnant at 4bcfd for the last 15 years.”
He said that the country would do away with the deficit gas production by importing 3bcfd by December 2018.
A Turkish company, Global Energy Infrastructure Limited, is constructing another LNG import terminal with a capacity of 750mmcfd at Port Qasim. As per plans, the terminal would be ready to import gas sometime in July-December 2018, it was learnt.
https://www.reuters.com/article/us-woodside-lng-idUSKBN1A50KT
MELBOURNE (Reuters) - A plan by top global liquefied natural gas (LNG) exporter Qatar to ramp up output will stall the expected growth of U.S. LNG exports, the head of Australia's Woodside Petroleum, operator of the country's biggest LNG plant, said.
Qatar surprised rivals this month when it lifted a self-imposed ban on development of the North Field, the world's biggest natural gas field, saying it would boost LNG output by 30 percent to 100 million tonnes a year in five to seven years.
That put it on course to it wrest back the title of the world's top LNG exporter from Australia, which is set to overtake Qatar in the next two years.
Woodside, operator of the North West Shelf project, said Qatar's plan showed the emirate shares its outlook for solid demand growth for LNG and gives importers like China, India, Pakistan and Bangladesh the supply certainty they need to lock in gas expansion plans.
"The Qataris will not take up all of the available market," Woodside Chief Executive Peter Coleman told Reuters in an interview on Thursday.
Qatar's expansion plan will compete directly with Woodside, which is looking to develop the Browse and Scarborough fields off Western Australia within the next decade - its so-called Horizon 2 projects - by processing gas through the North West Shelf plant or other existing facilities.
"On the challenge side, low cost will get into market, and that's what we're doing with our Horizon 2 projects. We're trying to make sure they're low cost, and they're well positioned, because we're targeting the Asian market," Coleman said.
Projects that will find it harder to compete will be those that need billions of dollars in new infrastructure and coal seam gas-to-LNG projects that need continuous capital spending to drill new wells, he said.
The International Energy Agency last week forecast the United States would become the world's second largest LNG exporter by the end of 2022, but Coleman said the Qatari expansion would stymie that growth.
"It'll keep a lid on U.S. expansions, because U.S. expansions are transportation-challenged," he said.
U.S. LNG flows largely into the Atlantic market, where it competes against pipeline gas from Russia and Norway.
http://www.powerengineeringint.com/articles/2017/07/ge-sets-gas-turbine-record-in-pakistan.html
GE sets gas turbine record in Pakistan
07/28/2017
By Tildy Bayar
Features Editor
GE has beat its global record for first fire of an H-class gas turbine in Pakistan.
Along with Chinese EPC partner Harbin Electric International Company, GE said it completed the first test in 66 days from delivery on-site.
It added that grid synchronization of the gas turbine was achieved in 74 days, another record.
Two 9HA.01 gas turbines and one steam turbine were supplied to the 1.2 GW LNG-fuelled combined-cycle Balloki power plant in Punjab, currently under development by Pakistan’s government through the National Power Parks Management Company Limited (NPPMCL).
The plant is scheduled for commissioning later this year. It will feature a primary re-gasified LNG fuel system, a secondary diesel fuel system, water cooled condensers and a cooling tower.
The first turbine is now producing up to 380 MW, GE said.
In a statement, the firm emphasized the “strong collaboration” with NPPMCL and Harbin Electric in driving the project.
The previous record was set at Pakistan’s 1230 MW Haveli Bahadur Shah plant, where the duration from gas turbine delivery to first fire test was 74 days according to GE.
Pakistan is the first country in the MENA-Turkey-South Asia region to install 9HA turbines.
Rashid Mahmood Langrial, CEO of NPPMCL, said, “We are committed to delivering on the government’s vision to strengthen power generation in Pakistan and to meet the growing needs for power for residential and commercial use.
“With the first fire and synchronization of the first gas turbine, Balloki is on schedule to enter operation and will support the people and national economic growth of Pakistan.
“The record completion of first fire is a strong demonstration of the extraordinary teamwork that is going into the project to ensure its timely commissioning.”
Pakistan is actively working on boosting its energy security. Earlier this month, the nation signed an agreement with France’s Agency for Development (AFD) for $192m in loans to bolster its energy sector against growing demand.
Planned work includes modernizing the 1 GW Mangla hydropower plant and improving transmission efficiency.
http://www.powerengineeringint.com/articles/2017/07/ge-sets-gas-turbine-record-in-pakistan.html
GE sets gas turbine record in Pakistan
07/28/2017
By Tildy Bayar
Features Editor
GE has beat its global record for first fire of an H-class gas turbine in Pakistan.
Along with Chinese EPC partner Harbin Electric International Company, GE said it completed the first test in 66 days from delivery on-site.
It added that grid synchronization of the gas turbine was achieved in 74 days, another record.
Two 9HA.01 gas turbines and one steam turbine were supplied to the 1.2 GW LNG-fuelled combined-cycle Balloki power plant in Punjab, currently under development by Pakistan’s government through the National Power Parks Management Company Limited (NPPMCL).
The plant is scheduled for commissioning later this year. It will feature a primary re-gasified LNG fuel system, a secondary diesel fuel system, water cooled condensers and a cooling tower.
The first turbine is now producing up to 380 MW, GE said.
In a statement, the firm emphasized the “strong collaboration” with NPPMCL and Harbin Electric in driving the project.
The previous record was set at Pakistan’s 1230 MW Haveli Bahadur Shah plant, where the duration from gas turbine delivery to first fire test was 74 days according to GE.
Pakistan is the first country in the MENA-Turkey-South Asia region to install 9HA turbines.
Rashid Mahmood Langrial, CEO of NPPMCL, said, “We are committed to delivering on the government’s vision to strengthen power generation in Pakistan and to meet the growing needs for power for residential and commercial use.
“With the first fire and synchronization of the first gas turbine, Balloki is on schedule to enter operation and will support the people and national economic growth of Pakistan.
“The record completion of first fire is a strong demonstration of the extraordinary teamwork that is going into the project to ensure its timely commissioning.”
Pakistan is actively working on boosting its energy security. Earlier this month, the nation signed an agreement with France’s Agency for Development (AFD) for $192m in loans to bolster its energy sector against growing demand.
Planned work includes modernizing the 1 GW Mangla hydropower plant and improving transmission efficiency.
http://www.aljazeera.com/news/2017/09/qatar-taps-pakistan-market-gulf-blockade-170904143241676.html
With UAE’s regional hub off-limits, direct trade routes are opening between Doha and Karachi to boost economic ties.
Doha, Qatar - A Qatari shipping company is set to launch what it calls the fastest direct service between Doha and the Pakistani port city of Karachi this week, as the Gulf state seeks to establish new trade routes amid a land, air and sea blockade from its Arab neighbours.
State-run conglomerate Milaha is overseeing the weekly venture, with the first vessel due to arrive at the newly-inaugurated Hamad Port outside the Qatari capital on September 11 following a transit time of four days - compared to a normally six-to-seven-day journey.
"We have been vigorously ramping up our operations between Qatar and key Asian markets in response to growing demand from traders, importers, and exporters on both sides," said Abdulrahman Essa Al-Mannai, Milaha president and chief executive officer, in a statement ahead of the launch.
The move comes as Qatar counters economic sanctions imposed by Saudi Arabia, the United Arab Emirates (UAE), Bahrain and Egypt three months ago.
The four Arab nations severed all diplomatic and trade ties with Qatar on June 5 over allegations of supporting "terrorism". Qatar strongly denies the claims.
Prior to the dispute, most of Doha's shipments to and from Pakistan docked at Dubai's Jebel Ali port - a regional hub.
But with the Emirati port now out of bounds as a trans-shipment centre, Qatari companies are increasingly exploring alternative links to effectively penetrate the Asian market.
Besides the direct route, Qatar and Pakistan are also trading via Oman's Sohar port.
"We used to trade via Jebel Ali in Dubai, but because of the restrictions and the ongoing Gulf situation, we are now going direct so Qatar can capture Pakistan's market," Babar Rauf, sales and marketing manager of Rahmat Shipping, Milaha's Pakistani agent, told Al Jazeera.
Earlier in August, Qatar Ports Management Company, Mwani, also kickstarted its direct shipping line between Doha and Karachi operated by the Asian firm Wan Hai.
'Win-win'
Milaha's new service, called PQX, will mainly bring perishable products and other food items, such as seafood, fruits and vegetables, from Pakistan.
https://www.nytimes.com/reuters/2017/10/30/business/30reuters-pakistan-lng-exxon-mobil.html
Exxon Mobil has pulled out of a major project in Pakistan, in a potential blow to plans to boost imports of liquefied natural gas (LNG) after years of winter shortages.
Differences among the six-member group behind the project in Port Qasim in Karachi mean French oil major Total and Japan's Mitsubishi may also quit and join a rival scheme, government officials and industry sources told Reuters.
A senior Pakistani government official put the chances of success for the project, set to be Pakistan's third and biggest by import capacity, at 10-20 percent due to the disagreements.
A highly-developed pipeline grid, extensive industrial demand and the biggest natural gas-powered vehicle fleet in Asia after China and Iran make Pakistan an easy fit for LNG and official estimates show imports could jump fivefold to 30 million tonnes per annum (mtpa) by 2022.
The new project would include a floating storage and regasification unit (FSRU), where LNG will be converted back into gas for feeding into the country's grid.
Qatar Petroleum [QATPE.UL], the world's biggest LNG producer, Turkish developer Global Energy Infrastructure Limited (GEIL) and Norway's Hoegh LNG, which will provide the FSRU, are the other partners.
While Exxon has pulled out, the U.S. company was now negotiating to join a separate project, Hasil Bizenjo, Pakistan's Maritime Affairs minister in charge of ports, said.
"They are thinking to build a new terminal in Port Qasim," Bizenjo told Reuters in the Pakistan capital Islamabad, adding that Mitsubishi and Total were also in talks about taking stakes in another consortium.
Exxon was pulling out because it had "issues with partners", particularly the developer, GEIL, one energy official said. Exxon's move leaves in doubt a multi-billion dollar deal Qatar has already struck with GEIL for the sale of up to 2.3 million tonnes of LNG annually over 20-years.
Exxon Mobil, Total and GEIL declined to comment, while a Mitsubishi spokesman said that the Japanese company has been continuing its talks with partners over the project.
Qatar Petroleum did not respond to requests for comment.
NEW INVESTORS?
LNG imports have transformed Pakistan's energy map since the country's first import facility was introduced in 2015.
If the second LNG terminal proceeds without glitches the South Asian nation will not suffer winter gas shortages for the first time in more than 10 years, energy officials say, in a likely boost for Prime Minister Shahid Abbasi's ruling party before the next general elections, due in mid-2018.
Government officials and industry sources said talks are underway to bring new players into the project, including Swiss trading house Vitol [VITOLV.UL], which declined to comment.
Rival traders Trafigura and Gunvor are already developing LNG projects in Pakistan, betting the country will account for a rising share of future profits and LNG trade.
Pakistan plans to add its second LNG import terminal by the end of this year, but private companies have proposed building six more largely around Port Qasim.
The Middle East was a bright spot for global liquefied natural gas demand in 2015. Now imports have plummeted so much that it could take a decade to recover.
Last year’s 37 percent slump and the prolonged negative outlook is in contrast to the region’s two-year LNG demand surge that outpaced global growth, according to BloombergNEF and ship-broker Poten & Partners Inc. data. The Middle East is now expected to make up less than 4 percent of global imports for at least eight years.
There are only five importers -- Egypt, Kuwait, Jordan, the United Arab Emirates and Israel -- of LNG in the Middle East. Bahrain is expected to join the group this year.
Why are LNG imports falling?
Gas finds in Egypt and the U.A.E. reduced the need for the liquefied fuel, and Jordan increased cheaper pipeline imports. “Domestic gas resources have been the main reason for LNG imports being subdued,” said Fauziah Marzuki, a senior associate at BNEF. Locally produced “gas will always be preferred over imports, within certain cost parameters of course.”
Which countries are leading the decline?
Egypt, the region’s biggest LNG importer in 2016 and 2017, will halt purchases this year and may resume exports thanks to surging domestic supplies from the giant Zohr field. Jordan will rely more on pipeline imports from Egypt, trimming its need for LNG. Bahrain, the only country that will add import capabilities in 2019, isn’t expected to reach meaningful volumes until 2022, according to BNEF forecasts.
Fizzling Gas
Liquefied natural gas imports in the Middle East had a record drop in 2018
What does this mean for Qatari exports?
Qatar, the world’s biggest LNG exporter, has boosted its position in the Middle East’s shrinking market since 2016. The exit of Egypt from the scene will likely erode that status. Almost half of Egypt’s imports came from Qatar last year. Still, the region isn’t a major market for Qatar and growth in Asia will more than offset declines in the Middle East.
How will this impact global markets?
Imports of LNG in the Middle East are dwarfed by Asia. Supply of the fuel -- driven by the U.S., Qatar and Australia -- is expected to rise almost 18 percent by 2030, and demand will grow more than double that rate. Even Kuwait, the region’s biggest importer, barely registers in global terms. Its imports are even less than the smaller markets in Asia such as Thailand, Bangladesh and Pakistan.
LNG Minnow
Middle Eastern countries to comprise just 3 percent of global demand in 2019
https://propakistani.pk/2020/07/28/pakistan-is-buying-its-cheapest-lng-cargo-ever-at-a-record-low-price/
PLL received an offer for an Aug 27-28 delivery cargo at about $2.20/mmbtu. It is worth mentioning that Pakistan has been out of the spot market in 2020, and this is their first tender since November 2019.
A.A.H Soomro, managing director at Khadim Ali Shah Bukhari Securities told ProPakistani,
This is a game-changer! It’s time for Pakistan to relook at long term LNG contracts and move towards Spot purchase. Let’s assess the possibility of cancellation of the contracts. Bargain in your favor. This solves half of Pakistan’s problems if we speedify the LNG terminals. The economy would grow in leaps and bounds if we reduce energy costs now.
This is lower than the Asian LNG spot price LNG-AS for August which on Friday was estimated to be about $2.35 per mmBtu. The prices are expressed in the document as a “slope” of crude oil prices, a percentage of the Brent crude price, and are typically a pointer for the opaque spot LNG market.
Pakistan LNG has a separate tender to buy two LNG cargoes for delivery in September which closes on August 4.
Fitch Solutions stated that Asian spot LNG prices continue to hover at historical lows as COVID-19 continues to drag economic activity and demand.
The spot prices in Asia have remained depressed accordingly, falling by more than 50% since the start of the year to hit USD 2.5/mmBTU at the time of writing in July, from USD 4.0/mmBTU in January. YTD prices are shown to have averaged USD 2.7/mmBTU, halved from USD 5.4/ mmBTU in 2019 and less than a third of the USD 9.7/mmBTU averaged in 2018.
LNG imports into key importing markets in Asia – apart from China – have registered large y-o-y declines across the board as gas consumption across industry and commercial sectors slowed to a crawl as strict COVID-19 containment measures were observed.
The outlook for LNG prices was hardly rosy coming into the year even before the onset of the coronavirus pandemic, amid a negative backdrop of slowing coal-to-gas switching in China and a milder winter, although it looks to have deteriorated further as energy demand sinks across the region.
The era of cheap natural gas is over, giving way to an age of far more costly energy that will create ripple effects across the global economy.
Natural gas, used to generate electricity and heat homes, was abundant and cheap during much of the last decade amid a boom in supply from the U.S. to Australia. That came crashing to a halt this year as demand drastically outpaced new supply. European gas rates reached a record this week, while deliveries of the liquefied fuel to Asia are near an all-time high for this time of year.
With few other options, the world is expected to depend more on cleaner-burning gas as a replacement to coal to help achieve near-term green goals. But as producers curb investments into new supply amid calls from climate-conscious investors and governments, it is becoming apparent that expensive energy is here to stay.
Already, there are signs around the world that supplies will fall short:
Beyond a massive expansion in Qatar, few new LNG export projects have been cleared since the start of 2020.
End-users have been less willing to take equity stakes in upstream projects or sign long-term supply deals due to uncertainty surrounding government-led efforts to reduce emissions.
U.S. shale drillers aren’t immediately responding with additional production, as they’re under pressure from investors to curb spending and avoid creating another glut, while key pipeline projects struggle to move forward.
“No matter how you look at it, gas will be the transition fuel for decades to come as major economies are committed to reach carbon emission targets,” said Chris Weafer, chief executive officer of Moscow-based Macro-Advisory Ltd. “The price of gas is more likely to stay elevated over the medium-term and to rise over the longer-term.”
Strong Consumption
By 2024, demand is forecast to jump 7% from pre-Covid-19 levels, according to the International Energy Agency. Looking further out, the appetite for liquefied natural gas is expected to grow by 3.4% a year through 2035, outpacing other fossil fuels, according to an analysis by McKinsey & Co.
Surging natural gas prices means it will be costlier to power factories or produce petrochemicals, rattling every corner of the global economy and fueling inflation fears. For consumers, it will bring higher monthly energy and gas utility bills. It will cost more to power a washing machine, take a hot shower and cook dinner.
It’s especially bad news for poorer nations like Pakistan and Bangladesh that reworked entire energy policies on the premise that the fuel’s price would be lower for longer.
European natural gas rates have surged more than 1,000% from a record low in May 2020 due to the pandemic, while Asian LNG rates have jumped about six-fold in the last year. Even prices in the U.S., where the shale revolution has significantly boosted production of the fuel, have rallied to the highest level for this time of year in a decade.
While there are several one-off factors that have pushed gas prices higher, such as supply disruptions, the global economic rebound and a lull in new LNG export plants, there is a growing consensus that the world is facing a structural shift, driven by the energy transition.
A decade ago, the IEA declared that the world may be entering a “golden age” of natural gas demand growth due to historic expansion of low-cost supply. Indeed, between 2009 and 2020, global gas consumption surged by 30% as utilities and industries took advantage of booming output.
Bangladesh’s state-run Petrobangla plans to stop buying spot LNG cargoes for the rest of the year after a quadrupling of prices over the past year to a seasonal high. Pakistan has repeatedly canceled and reissued LNG purchase tenders in an effort to get better offer prices, without avail.
The evolution marks a stark turnaround after developing Asia helped drive a surge in trading of the super-chilled fuel and built LNG import strategies on the premise that spot shipments would be abundant and cheap. Unlike richer counterparts in the region that can pass on this year’s historic price rally to end-users, some governments may need to rethink LNG procurement strategies and reduce exposure to the volatile spot market, switch to dirtier fuels such as coal or oil or even curb electricity production.
“With spot prices so high and with relatively low development, these countries may not be able to afford the current sky-high prices for gas on the global market,” said Ron Smith, senior oil and gas analyst at BCS Global Markets. A return of power rationing this winter “seems quite possible” for Bangladesh and Pakistan.
Nations in South Asia have the most potential to take advantage of cheaper fuel oil to offset the rise in spot LNG prices through this winter, said Felix Booth, head of LNG at energy-intelligence company Vortexa.
https://pakobserver.net/10707-km-pipelines-being-laid-to-reinforce-gas-transmission-network/
The two state-owned companies, SNGPL and SSGC, are in process of laying almost 10,707-kilometer pipelines to reinforce gas transmission networks in their operational areas across the country during the current fiscal year.
The Sui Northern Gas Pipelines Limited (SNGPL) would place 9,605 kilometers and Sui Southern Gas Company (SSGC) 1,102 transmission and distribution pipelines in their respective areas during 2022-23 aimed at improving the efficiency of the commodity supply to domestic, industrial, and commercial consumers.
The companies would collectively spend funds amounting to Rs 113.899 billion on the upgradation of the gas transmission and distribution system. “The SNGP and SSGC have planned to invest Rs 27,669 million on transmission projects, Rs 77,484 million on distribution projects, and Rs 8,746 million on other projects bringing the total investment of Rs 113,899 million during the fiscal year 2022-23,” according to an official document available with APP.
The available statistics indicated that Pakistan has an extensive gas network with more than 13,513 KM transmission, 155,679 KM distribution, and 41,231 KM service gas pipelines for cater to the requirement of millions of consumers.
The companies are also executing at least three strategic projects to supply gas to two Special Economic Zones (SEZs) and an industrial park in their respective areas to boost industrial production.—APP
https://www.gastopowerjournal.com/markets/item/13377-pakistan-plans-to-push-coal-fired-power-to-10-gw-shift-away-from-gas
Soaring fuel prices have made Pakistan move away from importing LNG and use domestic lignite to generate electricity instead. “LNG is no longer part of the long-term plan,” Pakistan’s energy minister Khurram Dastgir Khan told Reuters, revealing targets to increase coal-fired capacity to 10 GW, up from currently 2.31 GW, and build no more gas-fired power plants.
https://www.naturalgasworld.com/pakistan-floats-two-tenders-for-spot-lng-cargoes-105642
---------------
The federal government issued two tenders seeking spot liquefied natural gas (LNG) cargoes for the first time in nearly a year on Tuesday, while also announcing a deal that will see Azerbaijan provide the country with one LNG cargo per month.
https://www.dawn.com/news/1759531
Dependent on gas for power generation and running short of foreign exchange to pay for imports, the country has struggled to procure spot cargoes of LNG after global prices spiked last year following Russia’s invasion of Ukraine, leaving it to face widespread power outages.
But Asian spot LNG prices this year have eased from record highs of $70 per million British thermal units (mmBtu) hit in August, and are now trading below $10.
Pakistan LNG, a government subsidiary that procures LNG from the international market, has one tender seeking six cargoes on a delivered-ex-ship (DES) basis to Port Qasim in Karachi in October and December, according to the tenders posted online.
The delivery windows are October 5-6, 20-21 and 31, and December 7-8, 13-14 and 24-25. The tender will close on June 20.
Pakistan LNG’s second tender seeks three cargoes, also on DES basis to Port Qasim, for delivery windows of January 3-4, 28-29 and February 23-24. The second tender closes on July 14.
Pakistan LNG last issued a tender seeking 10 spot cargoes in July 2022, but received no offers.
Separately on Tuesday, Minister of State for Petroleum Musadik Malik told a news conference that Azerbaijan will supply an LNG cargo every month to Pakistan at a “cheaper price”.
He did not share details on the supply deal, but said that a contract had already been signed with Azerbaijan and that it will “start soon”.
Pakistan has two long-term supply deals with Qatar, one signed in 2016 for 3.75 million metric tons of LNG a year, and another signed in 2021 for 3m metric tons a year.
It also has an annual portfolio contract with ENI for 0.75m metric tons a year.
In 2022, Pakistan’s imports of LNG slowed to 6.93m metric tons for the year, down from 8.23m metric tons in 2021, according to data from data analytics group Kpler.