LNG Mashal Project needs a boost

The Economic Co-ordination Committee (ECC) made two major decisions regarding Pakistans energy problems in the near to long term. The committee approved 350 million tons of LNG imports from Qatar in a project due to start form 2011.
Another vital decision of allowing 4Gas - a company involved in developing and operating LNG import and re-gasification of terminals worldwide - to set up an LNG terminal at Karachi, was perhaps of more significance.
Pakistan is most likely to witness a massive 540 million cubic feet per day gas shortfall in FY10, according to a study carried by the Energy Expert Group in 2009, which needs some serious attention. With very limited success in gas exploration of late and the fast deteriorating security situation in the potential drilling areas of the country - the need to import gas was never higher than it is today.
The countrys primary energy supply/demand imbalance is expected to increase amid slow growth of indigenous resources. To meet this demand in the short run, Pakistan will be heavily dependent on gas imports, particularly LNG, due to its relatively shorter lead time. Imported gas is predicted to have 7 percent share in Pakistans energy mix by 2022 - for which more measures need to be taken.
LNG import facilities are believed to have the benefit of being modular in nature and the capacity can be added in increments as the demand grows. This is unlike a pipeline, which requires high throughput level from the beginning, to be considered viable.
Given Pakistans immediate requirement and already available gas distribution infrastructure, LNG floating storage is a relatively preferred quick fix. But there have been delays regarding the LNG Mashal project and there is no plausible way that LNG imports from Qatar will land as early as 2011 in Pakistan. The construction of an LNG terminal as big as the Mashal project requires no less than 24 months to be completed and start operations.
According to the initially agreed timeline - the Mashal projects construction approval was due by early 2009 to meet the deadline of 2011. That, however, did not happen and the recent announcement of allowing 4Gas to construct the LNG terminal beats the logic of importing LNG from Qatar (due to materialize by 2011), as the 4Gas project will not be completed before the start of 2012. And that too - if the work starts immediately.
Pakistan will become the sixth largest importer of LNG upon the commencement of the LNG terminal - therefore there is a need to carefully craft the pricing agreements with Qatar as any delay will lead to a possible termination of contracts because majority of the current LNG capacity in the world is already booked for several years.
Bear in mind that this Mashal project only provides a near term solution as Pakistan will require more than one such terminal to meet its gas demand in the long run. LNG prices have generally been 60-80 percent higher when compared to the dry natural gas, but are still more affordable than the expensive furnace oil imports.
There is a need to ensure that all new power plants in the pipeline are based on gas fuels rather than furnace oil - the resultant electricity will no doubt be more expensive than the one produced from natural gas but at the same time will be a lot cheaper than the oil based electricity. One hopes, there are no more delays in the already delayed Mashal project considering Pakistans dire need of gas in the near term.