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ISLAMABAD: Ministry of Energy has prepared four proposals to attract billions of dollars’ investment from China, which include coal gasification for fertilizer plant, Strategic Underground Gas Storages (SUGS) and Gwadar Petrochemical Industry Park, well informed sources told Business Recorder.

These proposals will be made part of the agenda to be discussed in the Joint Working Group (JWG) of China Pakistan Economic Corridor (CPEC) phase-II, the sources added.

Sharing details about coal to liquid engineering plant based on Thar coal for coal gasification to fertilizer project, the sources said, a techno-economic feasibility study will be required to enable formulation of practicable policy framework for coal gasification engineering projects.

The sources said, since China has expertise in this field; therefore, their help would be required in carrying out feasibility study in consultation with relevant stakeholders like OGRA, Government of Sindh, Board of Investment (BoI), etc.

A period of one year would be required for completion of these tasks.

Economic development: CPEC’s 2nd phase to reinforce Pakistan’s efforts, Wang told

At present, imported coal is utilized by power generating units and cement industry. The domestically produced coal from Thar coalfield is solely burned for electricity generation, whereas, production from other coalfields which is about half of country’s production is used in brick kiln industry.

The coal consumption and future demand is based on power projects and new licences issued to cement industry - 22 in Punjab, 15 in KP and 2 in Balochistan.

The lignite conversion into liquid/ gas has many challenges for development, which can be termed as technical, financial and commercial, especially to product utilization. Gasification on commercial scale is still to be proven.

The primary challenges encountered in Thar coal gasification include: (i) coal to gas and coal to oil projects require a substantial amount of water, which is one of the key issues in Thar desert; (ii) coal to urea project can make appropriate return; however, existing fertilizer manufacturing plants are mostly located far away from Thar (more than 600 km) at Mirpur Mathelo, Daharki, Sadiqabad, Multan and Sheikhupura. Therefore, transportation of syngas may require building new pipelines; (iii) integrated coal to gas and coal to oil projects is huge in terms of investment.

Therefore, off-take of the production at reasonable price to ensure appropriate return on investment is to be determined, which should also be competitive with international oil, gas and LNG prices; (iv) large capital outlay is estimated, around $ 2 billion, for coal to urea project with 1.3 MTPA productions.

Strategic Underground Gas Storages (SUGS) project’s feasibility carried out by Ramboll under Asian Development Bank (ADB) will be shared with Chinese counterpart. They would be requested to nominate their entity for carrying out the spade work for the implementation of the project.

A feasibility report was prepared by an international consultant (Sofrgaz France) for the construction of underground gas storage in 2007.

The consultant recommended conversion of two gas fields, i.e., Khorewah and Bukhari in Sindh as gas storage reservoir.

However, progress stalled on the project due to non-availability of excess gas.

With development of LNG regime together with progress on the gas import projects, Petroleum Division felt the need to develop the project and approached ADB to update the earlier feasibility report. In September 2020, ADB awarded the assignment to M/s Ramboll Denmark to update the feasibility report, which submitted a report on December 1, 2021 which is under review by the stakeholders and will be finalized shortly.

The next step is preparation of detailed design studies and finalization of transaction structure. The CDWP in May 2021 has already approved the PC-II, amounting to Rs 1.848 billion to conduct bankable feasibility report and transaction advisory. Planning Commission has allocated Rs 40 million in the budget for FY 2021-22 under PC-II. Petroleum Division is engaged with ADB for financial assistance for hiring the consultancy services of design studies and transaction structure.

According to the sources, the E&P sector may be offered to Chinese companies directly or in Joint Venture (JV) with Pakistani companies like OGDCL, PPL and MPCL on such terms and conditions which would be mutually beneficial for all stakeholders. Director General, Petroleum Concession (PC), will be point of contact for this project. Joint prospecting, exploration, development and marketing of metallic minerals will be offered to Chinese companies for JVs with Pakistani companies. Director General (Mineral), Petroleum Division, would be point of contact for coordination among Chinese companies, Pakistani companies, provincial governments and concerned licensing authorities.

Gwadar Petrochemical & Industrial Park (Siot Centico & Chinese SoE consortium) Government of Pakistan is ready to materialize the investment offer of Siot Centico & Chinese SoE Consortium for development of Gwadar Petrochemical & Industrial Park on either GtoG or B2B basis. However, approval of the National Development and Reform Commission (NDRC) of China would be required to carry out the investment plan under the umbrella of CPEC.

The key characteristics of the proposed investment are as follows: (i) Foreign Direct Investment (FDI), Public Private Partnership (PPP), Build-Own–Operate (BOO), no state guarantee and loan required; (ii) investment phase 1- $7 billion; phase II- $12 billion; (iii) to meet Pakistan’s domestic supply of refined oil and chemical raw materials; (iv) more than 4,400 jobs and vocational training; (v) annual output value no less than $20 billion; (vi) the foundation for the development of a modern Gwadar Industrial City combining petrochemical, steel and equipment manufacturing; and (vii) an integrated petrochemical, steel and equipment manufacturing Industry City.

The location of the project for the Refinery and Petrochemical Industry Park is at Pasani, about 85km from the existing Gwadar Port.

The location of the project for the LNG FSRU, specialized FSRU port, and natural gas industry as phase–II and proposed area of the project land is about 1000 acres, and the length of coastline is about eight kilometres.

Copyright Business Recorder, 2022

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SAMIR SARDANA Mar 26, 2022 08:50pm
Besides Strategic Underground Gas Storages (SUGS),Pakistan needs Oil storage (SPR) Import Oil from anyone,anytime & stock it in Pakistani caverns - pay storage & handling charges - & have a guaranteed buy back from the Pakistani state - on cash & carry or LC based credit The Oil importer will import on 6-12 months usance & roll over at LIBOR or USPR - & will discharge the cargo into the caverns (so NO NEED TO PAY FOR SHIP CHARTER (TIME CHARTER) ON HIGH SEAS). The Oil will be 3-5 days of Pakistani Oil demand & so will be filled 30 times a year. For Pakistan, the payment credit can be co-terminus with the usance terms, of the importer, AFTER THE OIL IS TANKED IN THE CAVERNS - so the USD outflow is STRETCHED,AND THAT HELPS THE CAD WHENEVER OIL DIPS - THE PMO CAN BUZZ THE IMPORTER TO BOOK THE OIL, & PAY THE FINANCING AND SHIPPING CHARGES,PLUS A SPREAD - AND HEDGE,THE PRICE RISK - TILL THE STOCKING TIME, IN THE CAVERNS STRATEGIC SOURCING = STRATEGIC STOCKING.dindooohindoo
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