Now, even with the US signing trade agreements with non-FTA countries, Pakistan still has no choice but to turn to other countries for LNG import - at least in the short run, says Mohammad Raziuddin, energy expert and chief executive officer of the Khyber Pakhtunkhwa Oil and Gas Company Limited.
US Shale Gas might be a reality but it's not available for Pakistan in near to mid future. We should not count on US Shale Gas as we don't even have a free trade agreement with U.S nor are we are in geographical proximity to import it from thousands of miles away.
The Jordan Cove Energy Project in Coos Bay, Oregon, became the first West Coast and seventh US LNG export project approved to export LNG to countries that do not have free-trade agreements with the US, stated the US Department of Energy.
DOE approved exports of the LNG equivalent of 800,000 Mcf/d (22.66 million cubic meters per day) of gas for 20 years from Jordan Cove. It is also the first Greenfield project to approve for non-FTA exports. Previous approvals have gone to import terminals that are adding liquefaction and export facilities.
The nod to Jordan Cove marks a total of 9.27 billion cubic feet per day of gas as LNG exports from the US. If all the projects were built, the total would be close to the amount of current exports by Qatar, now the world's largest LNG exporter. The approval of Jordan Cove leaves 24 other US export projects in DOE's queue for approval to export to countries without free-trade agreements with the US.
It had been reported in the media that in the absence of a free trade agreement with the United States, Pakistan cannot strike a liquefied natural gas (LNG) import deal with the US, leaving Pakistan with no option but to import LNG from other countries, namely Qatar, to lessen the country's energy crisis.
The IP gas pipeline will take approximately four years to complete after FID which itself is in doldrums. The project is estimated to cost $7.5 billion and its financing is a huge challenge. The hydel expansions (at Tarbela) are expected to cost $840 million are not expected to be completed before mid to late 2018 complete in 2018 and will then generate 1410MW. Similarly, the nuclear expansion project at Karachi Nuclear Power Plant (Kanupp) II is to be completed in 2019 ($4.8 billion and 1,100MW). This means Pakistan has no solution to the ongoing problem at least for the next four years except for LNG import which could come in as early as end of 2014.
Adding to this, there are a number of pending US export projects with approvals pending to various countries. Pakistan has not yet even applied for an LNG deal with the US and even when it does, it will take many years before it manifests and US LNG makes it way to Pakistan, says Raziuddin. US shale gas is unlikely to be as cheap as indicated given the shipping distance and potential upside in Henry Hub. LNG import contracts are not based on fixed prices but pegged prices - in this case to Henry Hub. When Henry Hub remains low then it is possible to import LNG at mentioned amounts but what about when prices rise like they have in the past in winter months or when natural disasters take place. When Henry Hub prices increase to $11-13, there is hardly a difference between this and oil pegged prices.
Additionally, it will take 25 days (three-and-a-half weeks) for US LNG to reach Pakistan which will obviously increase transport costs. Pakistan needs one ship to arrive weekly at its ports which means that for every ship that comes, seven more vessels will be at sea (coming and going) meaning that transportation costs will be very high and add on to the cost of the LNG.
Pakistan is in talks with QatarGas as while there are a few countries which are exporting LNG, Qatar has the regional monopoly in LNG and is the largest producer globally. Additionally, the fact that it only takes three days for LNG shipments to come in from Qatar means that Pakistan can get gas relatively quicker with lesser transport charges compared to Japan, China and India. Whilst there are numerous exporting nations around the globe (17 currently), only a handful are within economic shipping distance of Pakistan. Oman, Yemen and the UAE are all sold out and UAE is a net importer now.
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