The government has given the approval to five consortiums, including Exxon Mobil, Royal Dutch Shell, and Mitsubishi, to go ahead with their liquefied natural gas (LNG) terminal plans, a minister told Reuters on Friday.
The terminals will begin operations within two to three years, Omar Ayub Khan Minister of power and petroleum said in an interview on Friday.
Pakistan is seen as a big growth market for the global LNG industry as domestic gas production slips in tandem with a growing industrial economy hungry for gas.
According to a report by Reuters, This move comes on the heels of the arrests of two Pakistani business executives involved in building the country’s previous LNG terminals.
An anti-corruption drive, by Prime Minister Imran Khan, led to the arrests of a former boss of Engro, which built the first import terminal, and the chief of another company associated with a second terminal.
Power and Petroleum Minister Omar Ayub Khan downplayed any impact the arrests may have had on investors’ sentiments, saying the interest from multinationals speaks for itself.
“That is a ringing endorsement that (our) policies are clear and transparent,” he said. “It’s a competitive market.”
According to the report, The groups approved for establishing LNG terminals are Tabeer Energy, a unit of Mitsubishi, Energas with partner Exxon; Pakistan GasPort and commodities trader Trafigura; Engro with partner Shell, and Gunvor with Pakistani conglomerate Fatima.
Tabeer Energy, Engro and Energas already announced plans for the terminals which will be Floating Storage and Regasification Unit (FSRUs) vessels. These can be new or converted LNG tankers, speeding up the delivery of the import projects.
However, Exxon and Shell did not respond to requests for comment. Mitsubishi has project details on Tabeer Energy’s website. Engro, Fatima and GasPort did not immediately respond for a comment.
The five groups must submit plans for the terminals to the Ministry of Ports and Shipping by Nov. 5 for approval, but the cabinet has already approved them, Khan said, adding that they can begin operations within two to three years.
While the consortiums will pay for the construction of the terminals and royalty fees, Pakistan will fund a $2 billion north-south pipeline to distribute the gas, and storage facilities, he said.
Acute Shortage of Gas
Pakistan is facing a major shortage of gas for power production and to supply manufacturers such as fertilizer makers, hindering the country’s economy.
Its two LNG plants have a capacity of 4.5 million tonnes a year (mtpa) each. Khan said that a third 4.5 mtpa terminal could start next year. Imports amounted to 6.7 mtpa in 2018 and are set to rise to 7.9 mtpa this year, according to Refinitiv data.
The new terminals “will make a significant dent in the gas shortage,” Khan said. Gas is the main ingredient in the production of urea fertilizer.
Pakistan’s fertilizer industry has coped in the past year with a steep increase in government-set natural gas prices, Sher Shah Malik, executive director of Fertilizer Manufacturers of Pakistan Advisory Council, said in an interview on Thursday.
Two of Pakistan’s urea plants lack gas to run regularly, and one was closed last year, forcing Pakistan to import fertilizer. Since LNG is often too expensive for making fertilizer, the government should also expand domestic gas exploration before reserves are depleted, Malik said.
“We are heading for very difficult times,” he said. “If nothing happens, we’ll be high and dry.”