Sustainable LNG operations

Recently there has been great public interest in LNG debate which has been analysed thread bare purely on lng sustainability perspective without any political bias. Sustainability of Pakistan’s LNG business is not touched in the referred debate and therefore a need arises to shift the focus of Pakistan LNG sustainability towards real issues that may determine a future course of a successful action plan to supplement Pakistan’s energy needs through LNG / RLNG operations.

Today is a world undergoing Energy Transition and Sustainable Business Practices. No business or nation is expected to perform optimally in near future if not building their policy on a sustainable framework. So, the important question is “What are Sustainable Business Practices?” Here I would like to refer an online course of Harvard Business School that I attended last year with the title: “Sustainable Business Strategy”. According to HBS course content, the basic ingredients of sustainable business strategy are described in the sustainability diagram below:

Corporate Sustainability Theme by Harvard Business School

Above diagram summarizes that businesses need to create shared value for all members of society through innovative business operations that cater to social and environmental needs of all stakeholders – consumers, investors, regulators, governments, competitors or general member of society. Thus, corporate sustainability is a function of Sustainable Business Practices thereby finding the sweet spot where company can “do well” while “doing good”. To explain further:

  • “Doing Well” means maximizing shareholders value through efficient operations
  • “Doing Good” means taking right actions for betterment of consumers, society & environment

Pakistan’s energy sector in general and LNG / RLNG operations in particular need to be analysed on the basis of the concept of “Doing Well while Doing Good”. Let’s initiate Pakistan LNG sustainability debate by analysis of individual stake-holder’s role in LNG / RLNG supply chain.

LNG Suppliers

Local parties involved in LNG supplies are PSO (Pakistan State Oil) and PLL (Pakistan LNG Limited). While both PLL and PSO are handling LNG procurement under instructions from government of Pakistan, actually this procurement is hampering the actual business of PSO i.e. Sales of Petroleum Products in Pakistan. LNG directly competes with liquid fuels for market share. Both these companies had little or no experience in handling LNG trade and still have little functional capability to perform their duties with regards to efficient procurement of LNG and its accurate Custody Transfer.

Navigation & Port Handler

Port Qasim Authority (responsible for all operations at Port Qasim) had clearly issued instructions that no LNG terminals could be built within Gharo Creek – the main navigation channel at Port Qasim. Despite these instructions Engro Elengy Terminal started their operations in 2015 in Gharo Creek, resulting in huge “Port Charges” throughout their 5-years operations due to disturbance caused to other cargo ships / crude carriers whose operations gets adversely affected due to anchorage of FSRU in main navigation channel. Following diagram identifies location of both FSRU based regasification terminals at Port Qasim. PGPL terminal is appropriately located in Chara creek and record available on OGRA website clearly indicates that Port Charges paid by PGPL for their operations are significantly less than Engro Elengy Terminal. All these charges are borne by RLNG consumers and both terminals have no liability or risk in this regard. Engro Terminal location is not supportive of sustainable business operations due to presence of FSRU obstructing navigation of other ships.

Configuration of RLNG Terminals at Port Qasim

 

Re-gasification Terminal Operators

Regassification terminals at Port Qasim are both FSRU based with small actual investments for building a long-term valuable asset for sustainable RLNG / LNG operations in Pakistan. Cost per unit of re-gasification is almost double that of land based terminals operating in other parts of the world.

 

Get a complete account of LNG Debate by Ex-PM Shahid Khaqan Abbasi and SAPM Nadeem Babar

Pakistan LNG Terminal Limited (PLTL)

It is not understood till date as to what are the responsibilities of PLTL in RLNG supply chain in Pakistan. It is now public information that PLTL Managing Director was terminated from service when he insisted on application of Liquidated Damages on PGPL for delay in starting operations. Since then no further activities are in the knowledge of this author that were performed by PLTL in import, distribution and sale of RLNG in Pakistan. Is this sustainable as existence of PLTL as a company is paid by RLNG consumers.

SSGCL and SNGPL

SSGC and SNGPL have minted huge money in the process of delivery of RLNG to consumers. Their take-away in RLNG tariff is highest during last 5 years of operations. Not only they got huge money through RLNG tariff, they were also successful in creating un-utilized assets – earning 17% return on assets which is paid by gas consumers in Pakistan.

Ministry of Energy – Petroleum Division

Ministry of Energy – Petroleum Division is the facilitator in the LNG / RLNG operations in Pakistan. Their performance during 5 years with regards to RLNG supply is that of aiders and abators of monopoly creation. By issuing Policy Guidelines for inclusion of UFG (un-accounted for gas) losses in RLNG tariff and charging capacity payments from RLNG consumers not only caused burden for RLNG consumers but had practically made it impossible for Third Party Access regime to be implemented in Pakistan. This is also not sustainable has SSGC and SNGPL had already lost their capability to demonstrate efficient operations.

OGRA – Oil & Gas Regulatory Authority

OGRA had been a silent spectators and facilitator (hand in hand with MoE-PD) to support implementation of Policy Guidelines which have been issued by previous regime (during 2015 to 2018) in contradiction of OGRA Ordinance. Recently, some corrective actions have been taken by Independent regulator in Pakistan, however, OGRA’s decision to correct the anomalies has been challenged in Court of Law with malafide intent by SSGC and SNGPL.

Consumers

Due to over whelming impact of UFG in gas / RLNG price in Pakistan consumers can be currently classified in two categories:

  1. Consumers who benefit from UFG
  2. Consumers who suffer due to UFG

Category – A consumers are benefitting through UFG phenomenon as they are sharing their energy costs with Category – B consumers under the garb of UFG (theft / meter tempering) with the facilitation of Sui companies, MoE and OGRA.

Additionally, UFG components other than theft / meter tempering are hitting both the categories of consumers through UFG rate rider embedded in gas price.

Above point of view by the author sets the stage for an open debate on the future of RLNG / LNG business in Pakistan and can be taken as basis for a Sustainability Debate for LNG / RLNG Operations in Pakistan.

Author can be accessed by commenting below of writing to kamran@energineers.net