Engro and SSGC sign LNG Service Agreement

abarrelfullabarrelfull wrote on 05 Feb 2015 10:21

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April 30, 2014

LNG Service Agreement (LSA) was signed between Engro Elengy Terminal Private Limited (EETPL) and Sui Southern Gas Company (SSGC) today amid the presence of Shahid Khaqan Abbasi – Minister of Petroleum and Natural Resources; Jam Kamal Khan – Minister of State for Petroleum & Natural Resources and the senior management of SSGC and Engro Corp. This agreement is in line with the Federal Cabinet’s approval for the LNG import infrastructure project.

Speaking at the occasion, Shahid Khaqan Abbasi said, “In order to combat the energy deficit, we are working on developing an efficient and sustainable power generation, transmission, and distribution system that can cater to the demands of the country and boost our economy. LNG import is crucial because it will substantially reduce the production costs of thermal power by replacing furnace oil and will improve the efficiency of thermal generation plants. It is the fastest stopgap solution to Pakistan’s energy needs.”

Expressing his views, Sheikh Imran ul Haque – CEO of Elengy Terminal Pakistan Limited (ETPL) on behalf of Engro expressed gratitude to the Government and Ministry of Petroleum and Natural Resources for their commitment and their genuine efforts and contributions towards the energy efficiency of the country. He added that LNG Import is the fastest short-term solution to Pakistan’s crippling economic needs. Pakistan’s existing gap between gas supply/demand is approximately 1.6bcfd. At the current rate of consumption, it is expected that Pakistan will run out of gas in less than 20 years, hence it is imperative to look for the alternative source of gas in and around Pakistan. Importing LNG will enable the government to save significant foreign exchange through import substitution of oil and alleviate the energy crisis plaguing the country.

Earlier, ETPL had bid for the fast track LNG contract to handle up to three million tons per annum (MTPA) of LNG or 400 MMSCFD of re-gasified liquefied natural gas (RLNG) for the next 15 years

The infrastructure of the terminal has to be constructed in 335 days. Once completed, the project will process imported LNG and inject 400mmcfd gas to the national network, which will reduce the existing shortage of 1.6 billion cubic feet by one-fourth. The execution of the project is complex for many reasons and includes engineering, procurement, construction and commissioning of a 24 km high pressure piping network which includes diameters of 24″ & 42″. EETPL is to construct and commission a new jetty within 11 months, and involves safe integration of the FSRU and downstream piping network. Engro possesses expertise to develop and execute projects of such nature.

The ETPL tolling price is $0.66 per mmbtu is an extremely low price relative to international benchmarks. ETPL’s price is competitive and reflects ETPL’s focus on ensuring affordable LNG to the nation.

Unlike standard LNG import deals, the liability of Engro Corporation is unlimited and without a cap. SSGC has even the right to terminate within four months of signing of the LSA if certain conditions subsequent are not met saddling Engro Corporation with significant [dead] investment. In case Engro Corporation is not able to meet the first gas date of 11 months from signing of LSA, it is liable upto US$ 0.15 million per day. EETPL is also required to meet a service factor of 95% or better.

It is important to emphasize that EPTL’s bid was declared fully compliant with the RFP by GOP’s independent consultants QED, subsequent to which the SSGC Board, ECC and Cabinet approved of the project. OGRA’s third party auditors, SGS, have also confirmed that EETPL complies with all requirements of LNG Rules 2007 and LNG Policy 2011. EETPL is working with partners of international repute and is committed to comply with all safety regulations in PQA.

As a Pakistani multinational, Engro is committed towards making Pakistan an energy sufficient country by religiously following the highest international ethical practices.

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