Pakistan to Become World’s 3rd Country With 3 LNG Terminals at a Single Port

Pakistan will become the third country to install more than two LNG Floating Storage Regasification Unit (FSRU) terminals at a single port, following Brazil and Indonesia.

Globally, a first or second FSRU is followed by an Onshore Terminal to create a strategic national asset to ensure supply security. However, in Pakistan, it is followed by two more offshore FSRU terminals, sources familiar with the matter told ProPakistani. The move is being discouraged by the major LNG importers across the world due to supply security and safety hazards of FSRUs.

When contacted, an Oil and Gas Regulatory Authority (OGRA) spokesperson, Imran Ghaznavi, said that as a regulator they don’t have any preference for offshore or onshore terminals, but they have to make sure that all documentation is completed, NOCs are issued, space is made available, and proper safety measures are undertaken.

He explained that while granting the two new licenses for offshore LNG terminals proper review of all the available facts and figures was done. The government is moving towards onshore terminals as it will boost the storage facility and ensure the security of supply. In the next five years, more and more storage for the LNG supply will be required as the indigenous gas is depleting, he remarked.

On the condition of anonymity, an official of the Petroleum Division told ProPakistani that the main hurdle in the execution of various options in the establishment of LNG terminals is the permission of the Ministry of Maritime Affairs. If the ministry is ready to provide NOC, then neither the Ministry of Energy nor the regulator will have any problem exploring onshore or virtual LNG supply options, he said.

Currently, the LNG supply chain is fragile and cannot afford even a couple of days of interruption in LNG cargo supply. The official explained, “Take the example of the summer dry docking of EETL FSRU; while it was only a matter of a few days, but due to a weak supply chain, everyone was concerned, and the government was nervous to let it go. There is consensus that the country needs more and more LNG storage, and the onshore terminal is also one of the options to ensure it”.

Currently, Pakistan is operating two offshore FSRU LNG terminals at Port Qasim. One of them is being operated by Engro Elengy Terminal Limited (EETL), while the second one belongs to Pakistan Gas Port.

In April 2021, the Oil & Gas Regulatory Authority (OGRA) had issued licenses for the construction of two additional LNG Terminals. FSRUs are required when there is a long-term conformed demand for LNG. With a certain demand, FSRU projects are detrimental in terms of rentals and lack of operational flexibility, which has certain economic costs.

An onshore terminal becomes a better prospect due to larger storage, jobs for locals, and reduced flight of USD.

It is worth mentioning that the safety hazards of more than two FSRUs at any single site can be managed. For safety, a Quantitative Risk Assessment (QRA) could be performed by independent and specialized parties to verify the risk profile.

Globally, only two countries, Brazil and Indonesia, have five and four FSRU terminals at one port, respectively.

Major importers of LNG (including Japan, Korea, India, Singapore, and China) import exclusively via onshore terminals to serve their growing economies. Bangladesh recently stepped away from all future floating initiatives to opt for onshore terminals going forward.

Over the next decade (2021 – 2031), 39 terminals are expected to become operational around the globe, and the majority of them are to be established onshore. Out of total LNG terminals, 29 are onshore, while ten are offshore, with their status as either under construction or approved.

Furthermore, China has one offshore and 16 Onshore LNG terminals, India has two terminals each in offshore and onshore points, the Philippines has four terminals, of which two are offshore and two onshore. Taiwan and Vietnam have two onshore terminals each, in the pipeline.

Similarly, Japan, Kuwait, Myanmar, South Korea, and Thailand have one onshore terminal, which is under process. However, Mozambique, Nicaragua West, Cyprus, El Salvador, and Ghana have one offshore FSRU-based terminal in the pipeline.

FSRU-to-Onshore is a natural path to increasing LNG demand in Pakistan (larger storage and re-gasification capacity). Globally, a first (or second) FSRU is followed by an Onshore Terminal to ensure the security of energy supply, the longevity of the gas market, and creating a strategic national asset for the country.

The construction of one onshore terminal can potentially save a freight cost of $38 million per annum (12 cents/MMbtu), reduce forex outflow to the tune of $500-600 million in FSRU rentals over the terms of TCP. It will also increase stability in the supply chain (Backup to increase from 4 days to 2 weeks due to larger storage). Potential savings of $5 million per annum in demurrage charges (1.6 cents/MMBtu) can also be expected from the availability of an onshore terminal.



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