1. 1

2. NATIONAL MANAGEMENT COLLEGE
102nd NATIONAL MANAGEMENT COURSE
IRP – PRESENTATION
WILL LNG IMPORT SUBSTITUTE PIPED GAS IMPORT?
2
ASAD MAHMOOD QAZI
Ex-Cadre (IB&NH)
Faculty Advisor: Rai Ijaz Ali Zaigham
24th June, 2015

3. Sequence
• Introduction
• Statement of the Problem
• Research Question
• Research Methodology
• Significance and Scope
• Natural Gas
• Benefits & Uses
• Benefits of Gas in Pakistan
3

4. Sequence
• Trans-border Gas Import Pipeline Projects
• IP & TAPI
• Liquefied Natural Gas (LNG)
• Need for LNG
• LNG a Value Chain
• LNG Import in Pakistan
• Analysis – LNG Import Vs. Piped Gas Import
• Conclusion
• Recommendations
4

5. Sources Consulted
• 22nd World Gas Conference, Tokyo 2003 - Report
• Internal Documents of M/o Petroleum and Natural
Resources, Islamabad (Total Gas Demand on System,
2013)
• Inter-State Gas Services Limited –MPNR
• Earnest and Young (2013), Global LNG: Will New
Demand and New Supply Means New Pricing
• International Gas Union – World LNG Report, 2014
• Pakistan’s Gas Pipeline Projects, Energy Charter
Treaty Meeting on Transit and Trade, October, 2006.
5

6. Sources Consulted
• TAPI – Conflict Resolution Mechanism – Express
Tribune, March, 4, 2015
• Greening Natural Gas Delivery – LNG Vs.
Pipelines
• Overseas Investors Chamber of Commerce and
Investments (OICCI) Pakistan, Energy Sub-
Committee, NEPRA’s State of Industry Report,
2013
• Article By Zafar Bhutta, The Express Tribune,
February 20, 2015 – 21b LNG Import Deal
• Iran-Lybia Sanctions Act, 50 USC 1701
• Certain Websites on LNG & Piped Gas Imports 6

7. Sources Consulted
• Officials & Departments consulted
– Mr. Irshad Ahmed Kaleemi – Ex-Joint Secretary
(Development) MPNR, Islamabad, Ex-MD GHPL,
Ex-Director, PPL
– M/o Petroleum and Natural Resources, Islamabad
– OGDC, Islamabad
– SGNPL, Lahore
– Hydro Carbon Development Institute of Pakistan,
Islamabad (HDIP)
7

8. INTRODUCTION
8

9. Introduction
ENABLE AS MANY PEOPLE AS POSSIBLE TO
ACCESS ENERGY
Gas will be the energy of the 21st century. 10-Year
Demand forecast @ 2.5% per annum, ranking it second
in the global energy mix in 2030
Total Says: Already a top-tier global producer of
liquefied natural gas (LNG), we continue to expand our
positions through a policy of strategic partnerships
9

10. Introduction
• Acute and lingering energy crisis – Pakistan
• Effects – Severe Socio-Economic and Industrial
• Reasons – Mismanagement, Feeble Regulatory and
Pricing Mechanisms
• Supply and Demand Gap
• 44% Primary Energy Needs through Natural Gas
10
Source: Total Gas Demand on System, 2013 – M/o Petroleum & Natural Resources, Islamabad

11. Introduction
• Decreasing Natural Gas Reserves
• Slow pace of New Discoveries
• Fill in the gap, Country needs to import to supplement
• Natural Gas Imports – Principally Piped Gas & LNG
• Piped Gas Import Projects – IP & TAPI
• LNG Import – Quick in Mitigating the Shortage
• Natural gas converted into liquefied state by
compression
– Negative 260F (160C)
– Reduces volume of gas 600 times
11
Source: www.slideshare.net/kellylng.deepwaters

12. Introduction
– LNG is converted into gaseous form at import
facility (i.e. platform, ship, onshore facility)
– Transported to end user via main trunk pipeline
• Japan, Korea and China included LNG – as a
replacement to RFO as power plant fuel
• Pipeline Projects – remain in limbo
• What options Left – Importing LNG or Piped Gas?
12
Source: Business Recorder – March, 2014 – LNG Replaced Residual Furnace Oil (RFO)

13. Statement of the Problem
Owing to the geopolitical constraints, internal security
issues and shortage of domestic natural piped gas for
local consumption, it seems improbable that piped-gas
import will materialize and sustain in foreseeable
future. The piped gas projects – IP and TAPI seem to
remain in limbo due to Afghan security, American
influence and financial constraints. LNG import can be
a fast track option than the piped-gas import
13

14. Research Question
Which option to be exercised – trans border
piped gas import or LNG import?
14

15. Research Methodology
• Descriptive and analytical approaches
• Discussions
• Library-Books, Journals, Magazines etc.
• Internet
• Interviews
• News Reports
15

16. Significance and Scope
• Immediate attention of NMC researchers, research
groups, NGOs, media, etc.
• Nature of topic in policy perspective & current
• Complex security situation and enormous challenges
• Focus of research on practicality & implementation
• Service to nation - knowledge base and background
• Sensitizing coming generation
• Prioritizing national interests & purpose
16

17. NATURAL GAS
17

18. Natural Gas
It refers to natural gases that occur in mother nature
underground deposits. The gas is exploited and compressed to
convert it into LNG which is mainly methane-CH4
18

19. Natural Gas
Benefits
• 1993 to 2011 – Global Energy Market demand for
Natural Gas expanded 650 mtoe to 1380 mtoe
• Minimal per unit power generation cost
- natural gas plant: $650/kw
- coal-fired plant: $1,300/kw
- fuel-oil fired plant: $1,000/kw
Source: www.slideshare.net/Iran-Pakistan/Pipelines 19

20. Natural Gas
Benefits
• Higher Thermal Efficiency Translated into cost as
well
- natural gas plant: 45 - 50 % efficient
- coal fired plant: 30 - 35 % efficient
- fuel-oil fired plant: 30 - 35 % efficient
• Shorter Project Gestation
- natural gas plant: 2 - 3 years
- coal fired plant: 5 years
- fuel-oil fired plant: 4 years
Source: www.slideshare.net/Iran-Pakistan/Pipelines 20

21. Natural Gas
Uses
Cabinet of Pakistan has decided following priority
users of Natural Gas
 Domestic (Home)
 Commercial
 Fertilizer
 Power Generation
 Transportation (CNG)
Source: www.slideshare.net/Iran-Pakistan/Pipelines & MPNR 21

22. Benefits of Gas in Pakistan
• Cost Efficient – ($4.2 per mmcfd)
• Safe and Clean
• Development of far flung areas of BLN, Sindh &
KPK from where the gas is exploited.
• Local investor & local industry development
• Agricultural development due to domestic fertilizer
production & saving of FOREX reserves of Pakistan
Source: M/o Petroleum and Natural Resources, Islamabad 22

23. PAKISTAN’S TRANS BORDER
PIPED GAS IMPORT
PROJECTS
23

24. Pakistan’s Trans Border Piped Gas
Import Projects
• Iran – Pakistan (IP)
• Turkmenistan-Afghanistan-Pakistan-
India (TAPI)
24

25. Route
25

26. 26

27. Iran – Pakistan (IP)
In mid 1950s, a young Pakistani civil engineer Malik
Aftab Ahmed Khan proposed the idea of Iran-Pakistan-
India gas pipeline – IPI or Peace pipeline proposed to
deliver natural gas from Iran to Pakistan and India
27
Pakistan’s Trans Border Piped Gas
Import Projects

28. Iran – Pakistan (IP)
• Negotiations started in 1994 - Iran and Pakistan
– A preliminary agreement was signed in 1995
– Construction of a pipeline from South Paras gas
field to Karachi, Pakistan
– Later Iran proposed to extend the pipeline from
Pakistan to India
– In February 1999 a preliminary agreement between
Iran and India was signed
– 2009 India withdrew over security and pricing issues
28
Pakistan’s Trans Border Piped Gas
Import Projects

29. Iran – Pakistan (IP)
• Total length of Pakistani portion of IP is 784 km i.e.
from Asaluyeh to Multan, where the Irani gas will be
injected in to Pakistani Trunk
• Route – Asaluyeh – Bandar Abbas – Khuzdar –
Multan.
• Pipeline Diameter 56” (1,422 mm)
Pakistan’s Trans Border Piped Gas
Import Projects
Source: www.slideshare.net/Iran-Pakistan/Pipelines & MPNR 29

30. Iran – Pakistan (IP)
• Initial capacity was 8.7 billion cubic meter - now
raised to 40 billion cubic meter - meeting increased
gap
• Expected completion cost + $8 billion
• Pakistani segment completion of pipeline: 30.01. 2013
• President Zardari inaugurated on 11.03.2013
• PM Nawaz Sharif assured to complete
• Penalty clause on delay in implementation
Pakistan’s Trans Border Piped Gas
Import Projects
30

31. Prospects and Constraints
 Drivers
◦ Energy Security
◦ Peace Dividends
◦ Strategic Return
 Constraints
◦ Iran Pak Hostility
◦ Security of Pipeline – Kandhar to D.G Khan
◦ Strategic Constraints
31
Pakistan’s Trans Border Piped Gas
Import Projects
Iran-Pakistan (IP)

32. 32

33. TAPI Turkmenistan-Afghanistan-Pakistan- India
Pipeline
33

34. 34
Pakistan’s Trans Border Piped Gas
Import Projects
Turkmenistan-Afghanistan-Pakistan-India (TAPI)
• South Asian countries’ Cooperation in energy – Crucial
• Bringing peace in the region – Main concern
• SAs leading countries (India and Pakistan)
• Potential to pave the way for a compromise and a
balanced bargain
• Long time at stake (since 1990s)
• 2 Consortium BRIDAS and UNOCAL
• US support for UNOCAL, 1997 negotiations with
Taliban

35. 35
Pakistan’s Trans Border Piped Gas
Import Projects
Turkmenistan-Afghanistan-Pakistan-India (TAPI)
• In 2001 negotiation broke down
• Afghan new government resumed negotiations
• 2003 ADB started the technical studies
• India was proposed to participate – TAP to TAPI
(India is heading the Steering Committee)
• 2008 all participants signed (India did not convene the
meeting for 2.5 years)
• Supposed to start supply of gas by 2015
• Yet pipeline & construction preliminaries have not been
finalized
Source: www.slideshare.net/tapi/Pipelines/politicalstudies/southaisa/ & MPNR

36. 36
Pakistan’s Trans Border Piped Gas
Import Projects
Turkmenistan-Afghanistan-Pakistan-India (TAPI)
• Route - Dauletabad gas field – Herat – Helmand –
Kandahar – Quetta – Multan – Fazilka sector for India
• Length - 1,735 km pipeline
• Diameter: 56 inch
• Pakistan will pay transmission cost to Afghanistan and
will receive the same from India
• Volume Distribution - 33bcm: 5 bcm Afghanistan and
14 each for India and Pakistan
• Estimated cost $3.3bn & increased $7.6 bn
• Financed by the Asian Development Bank

37. TAPI Significance
For Turkmenistan
• Rich in natural gas
reserves
• Far from world oceans
• Wants access to market
to export its gas
• A Revenue source and
diversification of
Turkmen export roots
According to a
Statistical Review
2009, Turkmenistan
has the world’s fourth
largest reserves of
natural gas, 7.94
trillion cubic meters
(TCM), exceeded only
by Russia, Iran and
Qatar
Pakistan’s Trans Border Piped Gas
Import Projects
37

38. Afghanistan
is an
important
bridge
between
South and
Central
Asia
For Afghanistan
 TAPI could mean around five
billion cubic meters of gas for
internal needs
 $300 million of transit fee leading
to certain employment and
source-of-income opportunities
TAPI Significance
Pakistan’s Trans Border Piped Gas
Import Projects
Source: www.slideshare.net/tapi/Pipelines/politicalstudies/southaisa/ & MPNR 38

39. For India
• To acquire additional sources
of energy supplies
• Strategic benefit of equating
China in getting a foothold in
Central Asia
For Pakistan also it means a
source to fill in its energy gap,
earn the transit fee, employment
and other industrial benefits etc.
TAPI Significance
Pakistan’s Trans Border Piped Gas
Import Projects
39

40. • Russia interested in
TAPI
• Renewal of Moscow’s
strategic influence in
the region
• Reduce the EU source
of available gas field
• US want to connect
South Central Asia to
extend its influence from
South to Central Asia.
(New Great Game)
• Check on Russia,
counter China and
influence central Asia
• Alternative to IP for
India & to weaken the
Iran trade in gas.
TAPI Significance
Pakistan’s Trans Border Piped Gas
Import Projects
For Russia
For US
40

41. LIQUEFIED NATURAL GAS
(LNG)
41

42. 42

43. What is LNG?
• Natural gas (methane-CH4) - converted temporarily by
compression to liquid form
• LNG takes up to 1/600th volume of natural gas in the
liquefied state
• Colorless, non-toxic and non-corrosive
• Highly Flame-able, then HSE poorer than Piped Gas
• Energy density of LNG is %60 that of diesel fuel
Liquefied Natural Gas (LNG)
43

44. • Reduction in volume – cost efficient to transport over
long distances
• Purified by removal of condensates such as water,
mud, oil, other gases like CO2 , H2S & solids like
mercurry
• Transported through designed cryogenic sea vessels
(LNG carriers)
• Re-gasified into Natural Gas & injected in Main Trunk
Liquefied Natural Gas (LNG)
What is LNG?
44

45. Liquefied Natural Gas (LNG)
Process of LNG
45

46. Liquefied Natural Gas (LNG)
Compositions
Source: Energy Economic Research, Bureau of Economic Geology, University of Texas Austin46

47. Liquefied Natural Gas (LNG)
Need for LNG
Source: Why Pakistan Needs LNG Now – Article by Razi Syed – Daily Times, 26.3.2014
• Pakistan is currently passing through the most
difficult phase of its economic history due to acute
energy shortage
• Our energy requirements are outstripping supply
• LNG import is the fastest short-term solution to
crippling economic needs
47

48. Liquefied Natural Gas (LNG)
Need for LNG
Source: Energy Economic Research, Bureau of Economic Geology, University of Texas Austin
• IP & TAPI piped gas projects though being very
safe and cost efficient but are in the doldrums
• Hydel expansions at Tarbela Costs $840 million
– 2018 (1410 MW generation)
• Nuclear Expansion Project at Karachi – 2019
cost $4.8 bn (1100 MW)
• Next 3 to 4 years – no solutions to ongoing
energy crises except LNG import or Fast Track
implementation of trans border pipelines.
48

49. Liquefied Natural Gas (LNG)
LNG – A Value Chain
Source: http://www.singaporegas.com.sg/resources/end-users/
• LNG value chain - main stages
- Discovery, Transportation, liquefaction,
storage and delivery
49

50. LNG Chain
Source: http://www.slideshare.net/basicsforlng2011 50

51. Liquefied Natural Gas (LNG)
LNG Import to Pakistan
Source: www.wapda.gov.pk
• GoP devised short/long terms strategies – Energy crises
• Short term – LNG import & overcoming line losses
• Long term – Change in energy mix
• More shares for generation through coal and
nuclear sources
• Renewable sources – Hydro, Solar & Wind
• IP & TAPI piped gas imports
• Building new dams – Diamir Bhasha, Munda etc.
51

52. Liquefied Natural Gas (LNG)
Source: http://www.engro.com/our-business/elengy-terminal-pakistan/
• LNG import terminal at Port Qasim – 600 MMCFD
• Constructed by Engro Elengy Private Ltd.
• Elengy Terminal Pakistan is 100% owned
subsidiary of the company
• Handling, regasification, storage, treatment and
processing of LNG, RLNG, LPG etc.
• Total cost of the project is $145 m
LNG Import to Pakistan
52

53. Liquefied Natural Gas (LNG)
Source: http://www.engro.com/our-business/elengy-terminal-pakistan/
• Pakistan currently producing NG - 4200 mmcfd
• Demand is around 6000 mmcfd
• Import of 5000 mmcfd is likely to bridge the gap
• But won’t eliminate the problem completely
• LNG import shipments arrived from Qatar’s open
market on Spot Basis or OTC basis without any G
to G agreement, future trading market
• LNG injected to the SSGCL distribution network
LNG Import to Pakistan
53

54. Liquefied Natural Gas (LNG)
Energy Mix Comparison
Source: www.wapda.gov.pk
Pakistan’s energy mix is around 36% which amounts to
approximately $15.8 billion
54

55. ANALYSIS
55

56. Analysis
• In presence of IP Pipeline Project – Committing any
quantity of gas what’s the need of TAPI?
 IP Length - Asaluyeh to Multan 784 km
 TAPI - Dauletabad to Quetta 1735 km
• Means Increased – operational & security costs
• Paying Ransom and Transit Fee Both to: Rasheed
Dostam in Northwest Afghanistan, Kabul
Government & to Taliban etc. while Crossing through
Central Afghanistan, Kandhar, Balochistan
• Above two factors – Road blockers for TAPI
Why TAPI?
56

57. Analysis
• Initially Dauletabad & now South Yolotan/Osman
Gas fields – tremendous volumes
• An Embassy of Pakistan in Central Europe – got 3rd
Party Evaluation/Volume Confirmation of suppliable
Turkmen Gas
• Turkmenistan Govt. highly willing to supply
• SSGCL & SNGPL of Pak. – world renowned GCs
having par excellence in laying the pipeline in
shortest possible time with a great cost efficiency
Positivities of TAPI
Sources: Development Wing of MPNR & Interstate Gas Systems Pvt. Ltd. 57

58. Analysis
• LNG is +$16 mmcfd Costlier than Domestic Piped
Gas and + $ 8 mmcfd than the Imported piped gas
• Presently Pakistan buying LNG from open market
on spot basis – always expensive
• Qatar has committed all of its LNG to other buyers
for next 50 years – no official LNG for Pakistan
• What Qatar does? Asks any of future committed
buyer to give ex-quota from their volume to any
friendly buyer
LNG Import Vs. Trans-border Piped Gas Import
Sources: Development Wing of MPNR & Interstate Gas Systems Pvt. Ltd. 58

59. Analysis
• Qatar has refused Pakistan for any supply
• Till Port Qasim Authority does not deepen the
sea channel – risky in present shape
• Port Qasim does not have dredger/equipment
• PQA imposed high fee – more than normal e.g.
India imposed a fee of $0.9 – LNG cost increased
• Specialized LNG Carriers increased fee
• Insurance fee of LNG Carrier Marine Vessels -
increased
LNG Import Vs. Trans-border Piped Gas Import
Sources: Development Wing of MPNR & Interstate Gas Systems Pvt. Ltd. 59

60. Analysis
• All the global standards of Health Security &
Emergency – LNG a deadly commodity in comparison
to piped gas
• Rural area development factor, development of local
industry & friendly geo-political relations – exporting
countries will be compromised
• Thus LNG import, due to above factors, cannot
substitute trans-border piped gas import
LNG Import Vs. Trans-border Piped Gas Import
Sources: Development Wing of MPNR, Interstate Gas Systems Pvt. Ltd., HSE, Hydro Carbon
Development Institute, Islamabad, 60

61. CONCLUSION
61

62. Conclusion
• Both imports – LNG & Piped gas – varied prospects
& consequences
• Both Capital intensive – massive investments required
• LNG – value chain needs heavy investment
• Piped Gas – exploration & transportation – heavy
investment required alongwith security issues
• Transporting cost of both does not provide clarity –
Whether LNG or Piped gas?
62

63. Conclusion
• Transit security and maintenance risks of long
distance trans-border pipelines – difficult to evaluate –
geopolitical landscape – changing
• Trading facility of LNG – inter-regional gas trade –
major advantage over piped gas trade
• LNG a good way to diversify gas supply for regions
• Pipeline – a dominant mode of supply for large
volumes of gas
• New gas resources farther away from markets &
smaller in size – LNG import will increase
disproportionately
63

64. Conclusion
• Eventually –
• Short term measures – LNG is the preferred option
• Long term measures – Piped gas import be focused
• End – LNG import cannot substitute Piped gas
import
64

65. Recommendations
• Both imports between government to government
agreements – LNG not from open markets on spot
basis
• Intermediary service providers or the companies of
exporting and importing countries shall have the
sovereign guaranty
• Dispute resolution shall be governed by International
Law and not of the law of land of exporting and
importing countries
65

66. Recommendations
• Price revision mechanism shall have considerable
calendar years i.e. after a minimum of three years
• Medical experts shall evaluate the human health
impact of LNG and piped gas before taking the
decision of importing either of the two
• HSE (Health Security and Efficiency) measures shall
be worked out before resorting any of the two
• Duties and tax regime, fees, financial structures, etc.
be worked out minutely
66

67. Recommendations
• Gas import through trans-border pipeline, the geo-
politics a key element relating to Afghanistan &
Baluchistan security risks – experts be taken
onboard
• Security cost must be added in the overall cost of the
import of piped gas
• Futuristic energy requirements, especially of gas for
almost 25 years be worked out as per quantity to be
imported
67

68. Recommendations
• A group of private and public sector professionals on
energy sector, especially on gas, be formulated to
have an open debate on the media towards taking the
educated decision by taking the public on board
68

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