Qatar Energy is investing in the Pakistan LNG market by partnering with local business groups in the LNG terminal business. The project is in the final approval stage. It will be the first project in the LNG sector where there is no government involvement apart from regulations and pipeline access. There are no sovereign guarantees involved. Government has nothing to do with demand, supply, or pricing. This is the first step towards deregulation of the energy sector in Pakistan.
The terminal vessel capacity would be 170,000 MT – largest in Pakistan. The existing two FSRU’s capacity is 150,000 MT (Engro) and 165,000 MT (Gasport). The new terminal shall handle volumes up to 1 billion cubic feet (bcf) of gas molecules. Qatar Energy (former name Qatar Petroleum) is investing 49 percent in Energas while 51 percent shareholding is equally distributed amongst four local partners including Lucky and Sapphire groups for a project worth $450-500 million.
The idea of this was terminal conceived by local industrialists to secure energy supply for their businesses. Two players went to Qatar and the largest LNG producer of the world embraced them as Pakistan is becoming a significant market for Qatar’s LNG. Qatar Energy asked the locals to take care of demand and leave the supply to them. Having Qatar as partner the LNG supply surety is cemented. However, for best service, the seller may charge premium margins. But it would not dishonor supply – like the big traders are doing nowadays. The private sector can bet on the supply and plan its expansion.
The energy portfolio of two groups – Lucky and Sapphire is around 2 GW including IPPs and captive power plants. This terminal shall strengthen it further. Their sponsors are young with a blend of aggression and prudence. This consortium can become big in the energy market. The next step is for these or other private consortiums to develop energy market exchange.
The deregulation of the energy sector is a necessary condition for solving the energy puzzle - especially in the gas sector where the reliance is increasing on the imported LNG. The local Sui gas is depleting very quickly. Sui companies cannot give more domestic connections on the local gas. In some of the new residential developments, already the supply is LNG. The government should think of deregulating the pricing in incremental housing and Sui gas companies may charge rental from supplier on using pipeline. And existing consumers may pay weighted average cost of gas.
The government needs to come out from providing subsidy in the gas sector. Consumers should pay cost. The reliance is growing on imports. As is the case of petroleum (gasoline and diesel), the pricing should be based on cost and the private sector should supply while public owned distribution companies shall compete. Having a new terminal is a step in the right direction.
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