Jamshoro Joint Venture Limited ("JJVL" or the Company) is a joint venture project of local and foreign investors.
The project involves the setting up of an Extraction Plant capable of producing 450 MT per day of LPG and 90 MT per day of NGL from Natural Gas Condensate received from the Badin Gas Fields downstream of SSGC's Liquid Handling Facility situated at Jamshoro Sindh.
The project is aimed at capturing the widening gap between the Demand and Supply of LPG, accentuated by the ongoing shift from wood and other fuels to cheaper and environmentally friendlier fuels.
This is evident from the fact that LPG demand has grown at a 11% CAGR during 1997-2002, far surpassing the 2.4% p.a. growth in total energy consumption during the corresponding period.
Bulk of this demand is accounted for by the Domestic Sector that primarily uses LPG as a substitute for Natural Gas.
The actual Demand-Supply gap may be even wider if we take into consideration the demand from the automotive sector that inspite of being banned is very much in use.
In terms of a Province-wise demand mix, Punjab is the largest consumer with a 45% share followed by NWFP and Sindh with 22% and 19% respectively.
Supply of LPG is primarily from two sources ie, the Refineries and the Oil-Gas Exploration Fields with a 57:43 mix.
However the share of fields in this mix is expected to gradually increase in view of the lack of any significant addition on the refinery front.
The other sources of supply is imports that owing to being significantly expensive vis-a-vis domestic prices at present (US$ 479/ton vs. US$ 284/ton) ie almost 69% higher- Thus it becomes feasible particularly during the seasonal demand peaks that are accompanied by a sharp rise in domestic LPG prices.
The project is being set up at Jamshoro at a total cost of US$ 31 Million (PKR 1.9 Billion) with a 65:35 Debt: Equity mix. The Debt component of PKR 1,200 Million has been structured as a Debt Syndication / Privately Placed TFC.
The Project equity has been tiered into Preferred and Common components. Further to this, JCR-VIS Credit Rating. Company Limited has assigned JJVL secured debt rating of "A-(Single A Minus)" and medium to long term rating of "BBB+ (Triple B Plus)". Engineering, Procurement, Construction, and Commissioning Contract ("EPCC") to the Hanover Company of USA.
Furthermore Hanover will deliver the Plant and Equipment costing US$ 13 million for gas processing.
The Plant will be brand new and its engineering design will be certified by the leading world Authority on LPG engineering - Ortloff Engineers to the effect that the project meets the required standard of the Ortloff patent "SCORE" process that guarantees a minimum recovery of 95% in comparison to prevailing recovery rates in Pakistan of upto 65%.
Based on the Financial Projections prepared by JJVL, the future cash flows are robust with the project achieving break-even at only 34% capacity utilisation in 2006.