LNG management

BR Research July 24, 2019

We have more gas in the system than we need. No, you didn’t read it wrong. As a first in a long time, the country’s gas supply is bettering the domestic demand. Well there is no more good-news beyond this as it is simply a management issue; and has nothing to do with increase in gas production in the country.

The issue is with the imported Regasified Liquefied Natural Gas (RLNG) in the system that makes up a significant portion of the total gas consumption by various sectors amid declining indigenous natural gas production. It has been reported that increased rainfalls in the country has reduced the demand for RLNG, which is largely consumed by the power sector and the industrial consumers. This has triggered a state of crisis with the gas network infrastructure as RLNG from the terminal into the system pipelines is reportedly not being completely removed by the gas consumers. This has resulted in pressure build-up in the gas transmission network in the last few days as demand has eased, which if continues could lead to serious damage to the already debilitating pipeline infrastructure,

It might look like a trivial issue that has extended to only a few days. But its implications can be far-reaching. RLNG is only going to increase in Pakistan’s fuel mix as indigenous gas reserves continue to deplete and shale gas exploitation and off shore drilling continue to fail due to high cost and repeated failed attempts. While its pricing has been the centre of debate, other aspects warrant attention as well like setting up of a RLNG storage facility that could stock up on RLNG at times like these for days when demand is high.

One argument that could come forward is why the RLNG terminals reduce the supply of RLNG at a time when gas demand by the power sector has slipped and/or is being met through hydel resources. Call it a flaw or how these RLNG contracts operate, there are allocated volumes that need to be removed from the pipelines; otherwise there are financial repercussions borne. Already the payables are rising in the sector. You don’t want another circular debt to emerge.

Copyright Business Recorder, 2019

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