Red tape hurts execution of second LNG terminal

The second Liquefied Natural Gas (LNG) terminal of Pakistan is not likely to be completed on the scheduled date - June 30, 2017 - owing to bureaucratic hurdles, Business Recorder has learnt. In 2016, the government awarded the contract for building 2nd LNG terminal to Pakistan GasPort Limited-led Consortium at Port Qasim in Karachi after it emerged as the lowest evaluated bidder, but now the completion is not likely before some time in August, officials said.
According to officials privy to the developments, the consortium led by Pakistan GasPort Limited as the lead financier with $140 million investment (including Fauji Oil Terminal and Distribution Company Limited with a projected $40 million investment) had not yet opened a Letter of Credit (LC) or obtained No Objection Certificates (NOCs) from a number of relevant departments.
Sources also pointed out that the delay in the completion of 2nd LNG terminal would also adversely affect the efforts aimed at completion of two LNG-based power plants in Punjab and as a result the government may face serious challenges in containing power load shedding during peak summer months of July-September.
The entire project will cost $450 million of which Floating Storage Regasification Unit (FSRU) will cost $270 million and terminal $180 million. This terminal will have the capacity to handle 600 Million Cubic Feet per Day (MMCFD) of LNG and cater to the requirements of the Punjab based LNG power plants with a generation capacity of 3,600 Megawatts of electricity.
If the consortium fails to complete the LNG terminal by June 30, 2017, it will have to pay a hefty penalty of $272,000 per day as per contract. "If the project is delayed by a month the consortium will have to pay a penalty of $8.1 million and if for two months it will have to pay $16.2 million".
Sources said that LNG terminal is being built to supply fuel to Punjab-based LNG power station, ie, Balloki, located in District Kasur and Haveli Bahadur Shah, located in District Jhang and construction of these power houses would also be delayed hence there is a possibility that LNG terminal contactor may ask the government to ease the penalty clause.
When contacted the contractor Fasih Ahmed of LNG terminal said that the Pakistan Gasport Limited led consortium was working day and night to complete the terminal before June 30 and progress was on track. He said highly skilled local as well as foreign engineers were working on the project.
Pakistan GasPort Consortium Limited (PGPC) is establishing the country''s second LNG import terminal. Currently, 200 personnel are deployed at the site, Mazhar Point, Port Qasim The project is being undertaken in association with, among others, FOTCO and Trafigura, which is the world''s largest LNG trading company. The PGPC project is on track and shall be commissioned on target.
The consortium led by Pakistan GasPort Limited also includes the Fauji Oil Terminal and Distribution Company Limited (FOTCO) which had offered a levelized (service) charge of $0.4177 per MMbtu for handling of 600 Million Cubic Feet per Day (MMCFD) of LNG at the terminal which as compared with $.66 per MMBTU tolling fee of Engro Elengy Terminal (Pvt) Limited (ETPL) is much lower.