The Dynamic Transformation of the Global LNG Landscape and Pakistan's Virtual LNG Role

TEXT: In the ever-evolving realm of liquefied natural gas (LNG), the world is witnessing a paradigm shift, and Pakistan's LNG sector is at the forefront of this transformative journey. The forces propelling this change are multifaceted, encompassing shifting demand dynamics, substantial investments in critical infrastructure, and the impact of geopolitics. While concerns arose in the wake of the Ukraine crisis, resulting in a surge in LNG prices, there is a prevailing optimism that a new equilibrium will emerge, ushering in a period of more favorable pricing over the forthcoming years.

Sustainable energy lies at the heart of the 17 Sustainable Development Goals (SDGs) envisioned for 2030, with the seventh SDG dedicated to this noble cause. To realize this goal, Pakistan is undertaking a comprehensive strategy to bridge the energy deficit gap comprehensively. Pakistan boasts one of the most extensive natural gas pipeline infrastructures; however, its indigenous gas reserves are steadily declining. Natural gas, renowned for its efficiency and eco-friendly attributes when compared to competing fuels, holds immense promise.

Moreover, the concept of hydrogen-enriched natural gas presents a pathway to harness hydrogen energy, a potential green and sustainable energy source. Presently, Pakistan hosts two Floating Storage Regasification Unit (FSRU)-based terminals with a combined peak capacity of approximately 1440 million cubic feet per day (mmcfd). Furthermore, two additional FSRU-based private terminals, without government off-take guarantees, are in the pipeline, poised to contribute a combined peak capacity of 2000 mmcfd. In the face of depleting indigenous natural gas reserves and the absence of a dedicated pipeline for imported LNG, virtual LNG emerges as a viable solution. The Oil and Gas Regulatory Authority (OGRA) has already granted one license for virtual LNG construction/installation, with several provisional licenses in the preliminary stages. It is worth noting that consumers who have long relied on pipeline infrastructure may exhibit initial reluctance to embrace virtual LNG. Additionally, the current LNG pricing for short-term contracts and spot purchases, driven by local demand, tends to be on the higher side.

The Asia-Pacific region is witnessing a remarkable transformation, characterized by robust economic growth, favorable demographics, increasing policy support for natural gas, dwindling domestic gas reserves, and limited pipeline alternatives. These factors collectively paint an optimistic picture for LNG demand in the region. However, the resurgence of European LNG demand introduces an element of risk to this outlook. European buyers, who are often price-sensitive, have faced challenges accessing the spot market due to pricing dynamics. While these price pressures are expected to ease over the coming years, concerns regarding infrastructure limitations may emerge. The Chairman of OGRA aptly noted during the virtual LNG license hearing that the contribution of virtual LNG to the overall energy mix may be relatively modest. However, its significance lies in its ability to provide natural gas to regions currently disconnected from the national pipeline grid or to serve as an alternate or supplementary source to ensure uninterrupted supply.

The concept of a virtual pipeline is a pivotal component of this transformative journey. It refers to the process of delivering natural gas to customers who are unable to secure gas supply from local distribution companies or are not directly connected to the mainline natural gas pipeline or gathering system. Virtual pipelines have the potential to serve as a vital source of peak or emergency supply for gas customers already integrated into the conventional gas grid. Companies specializing in virtual pipelines can transport super-chilled LNG in specialized trucks, providing a direct and efficient solution to customers.

While the prospects of virtual LNG are indeed promising, the paramount concern remains safety. It is imperative to prioritize stringent safety procedures, rigorous monitoring, continuous improvement, and the assimilation of lessons learned during the implementation of virtual LNG in Pakistan. Safety must always take precedence, particularly in regions where this crucial aspect has not received the attention it warrants.

In conclusion, the trajectory of virtual LNG in Pakistan holds immense promise. It aligns perfectly with the aspirations of the export industry for sustainable energy and provides a lifeline to regions devoid of pipeline infrastructure or national grid connectivity, particularly in Pakistan's burgeoning mineral industry. As the nation embraces the possibilities of virtual LNG, it positions itself at the vanguard of sustainable energy solutions, propelling Pakistan towards a greener, more energy-se- cure future.

Sajjad Hussain

Copyright Business Recorder, 2023