“The law ministry, while giving its opinion, has asked the petroleum ministry to examine whether GHPL in terms of its Memorandum and Articles of Association can construct an LNG terminal for handling imports on tolling basis,” said an official.
According to officials familiar with the development, the board of directors of GHPL is facing pressure to take on the responsibility of building the LNG terminal.
However, the Ministry of Petroleum pointed out that the GHPL board in a recent meeting had decided to make appropriate changes to the company’s Memorandum of Association pertaining to investments in new projects through establishing subsidiaries.
The ministry has submitted a summary with the Economic Coordination Committee (ECC) of the cabinet, seeking a mandate for GHPL to float tenders for the award of LNG terminal contract.
The ministry also told the ECC that the Sindh High Court had ordered Sui Southern Gas Company (SSGC) to restart the bidding process for the second LNG terminal. The court gave the directive while hearing a petition filed by Pakistan Gas Port that argued that the winner of bids had not submitted required legal documents. SSGC had called the bids in October last year.
However, the government appears to have made up its mind to hand over the vital task to GHPL, which mainly looks after the state’s working interest in oil and gas exploration and production. The second LNG terminal will have the capacity to handle up to 500 million cubic feet of gas per day (mmcfd). The first terminal has already started functioning at the end of March this year at Port Qasim and the second facility will further bridge a huge demand and supply gap for gas in the country.
According to officials, GHPL will float tenders for developing the terminal under tolling arrangements. The selected project developer will be responsible for installation of the terminal, re-gasification of LNG and delivery to SSGC’s designated delivery points. GHPL will also hire a consultant that will advise on different commercial aspects pertaining to construction of the terminal.
Pakistan is facing an acute shortage of natural gas in electricity production and for general consumption by all sectors. Domestic gas production stands at 4 billion cubic feet per day (bcfd), far short of the growing demand estimated at 6 bcfd. This means a shortfall of 2 bcfd that the government wants to bridge through gas imports.
The government has been engaged in negotiations for a long time to enter into an LNG supply contract with Qatargas. Under the deal, Qatargas will supply 1.5 million tons of LNG in the first year and push volumes to 3 million tons later.
In the process, Fact Global Energy is acting as a consultant, engaged by the USAID, which is advising PSO about commercial aspects of the LNG procurement process.
