July 31, 2022 [FGN] – The government has been urged to improve storage capacity for liquefied natural gas (LNG) so that the commodity can be supplied to the industrial sector, especially export-oriented industries, to cheaper rates and without any disruption.
The two LNG terminals in Pakistan have a storage capacity of approximately 140,000 tonnes of LNG and a regasification capacity of 1.35 billion cubic feet per day (BCFD).
It is worth mentioning here that the Cabinet Economic Coordinating Committee recently decided to raise the price of LNG for five export-oriented industries (jute, leather, carpets, surgical and sporting goods) to $9 per million thermal units (mmBtu) in fiscal year 2022-23 from $6.5 per mmBtu in fiscal year 2021-22 under the competitive regional energy tariff.
Additionally, ECC has also increased the native gas tariff to Rs1,350 per mmBtu for export-oriented industries and Rs1,550 per mmBtu for general industries by Rs820 per mmBtu and Rs853 per mmBtu, respectively.
The main reason for the rise in rates is the rising prices of energy products in the international market.
The government has provided a subsidy of Rs 20 billion on electricity supply and Rs 40 billion on RLNG (regasified-liquefied natural gas) in the 2022-23 budget for the five export-oriented sectors.
Speaking to WealthPK, Junaid Ali, managing director of a textile unit in Sialkot Industrial Zone, said energy was an important input for industries, especially export-oriented sectors.
He said the government should facilitate industries, especially export-oriented sectors, as exports have contributed significantly to the country’s economy.
“LNG storage capacity is expected to be increased in Pakistan with the establishment of several LNG terminals at the Port of Karachi,” he said. Moreover, he said the government could sign longer-term contracts with LNG suppliers to ensure the availability of cheap LNG for the industry.
In 2015, the first government-Qatar agreement was signed between state-owned PSO and Qatar on a take-or-pay basis to purchase 3.75 million tonnes of LNG per year at 13.75% the price of crude. In 2021, Pakistan entered into another long-term contract with Qatar for three million tonnes per annum of LNG at 10.5% crude.
In total, Pakistan can import around 1,000 million cubic feet per day (mmcfd), 900 mmcfd and 100 mmcfd, respectively, under long-term contracts with Qatar. In addition, Pakistan also makes spot purchases, accounting for less than 15% of total LNG imports.
Pakistan is fast becoming an energy-deficit country, with indigenous gas’s contribution to total primary energy supply dropping to 33% in 2022 from 60% in 2005.
Forecasts from the Oil and Gas Regulatory Authority suggest that the country’s gas shortage will be nearly 4,000 mmcfd by 2030. This gas shortage has led to a drop in electricity generation of 12. 15% in July-April 2021 to 8.5% in July-April 2022.
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