Gas Sector in Pakistan

1
Gas Sector in Pakistan

• Presentation in Board of Investment

Islamabad - November 20, 2007
2
Directorate General Gas -Main Functions

• Formulation of the Government Policies relating
  to Natural Gas, Liquid Petroleum Gas (LPG),
  Liquefied Natural Gas (LNG), Compressed Natural
  Gas (CNG).
• Assessment and management of gas demand supply.
  
• Allocation of Natural Gas from different supply
  sources to various categories of consumers
• Review and execution of gas price agreements with
  producers and gas sales agreements between the
  producers and the Government nominated buyer
• Assessment of consumers gas prices based on the
  prescribed prices, determined by OGRA and making
  recommendations to the Government
• Monitoring of receipts of Gas Development
  Surcharge.
• Implementation of the President/PM directives
  including Gas supply schemes of the
  Parliamentarians that related to Khushal Pakistan
  Programmes I and II.
• Safety / security of gas pipeline in the country
  in consultation with Ministry of Interior and
  Civil Armed Forces.
• Initiating summaries for Cabinet/ECC and NSC and
  implementations of decisions thereof

3
Pakistan Energy Supply Mix 1992 to 2006
Total Primary Energy Supplies 57 MTOE
4
Natural Gas
5
Major Gas Supply Sources
Mingora
Peshawar
MAKORI 25 MMCFD (SNGPL)
JAMMU KASHMIR
Islamabad
NORTHERN SOURCES 125 MMCFD (SNGPL)
CHANDA 8-17 MMCFD (SNGPL)
Mirpur
QADIRPUR 550 MMCFD (SNGPL)
GURGURI 50 MMCFD (SNGPL)
NWFP
DHODAK 40 MMCFD(SNGPL)
BADAR 12 MMCFD (SNGPL)
Lahore
PUNJAB
Quetta
PIRKOH LOTI 42 MMCFD (SNGPL)
HASSAN 20 MMCFD (SNGPL)
Multan
SUI430 MMCFD (SNGPL) 110 MMCFD (SSGC)
MIANO, KANDANWARI 140 MMCFD (SSGC)
Sui
BALOCHISTAN
REHMAT 30 MMCFD (SNGPL)
MAZARANI 10 MMCFD (SSGC)
Sukkur
KANDHKOT 50 MMCFD (SNGPL)
SAWAN 280 MMCFD (SNGPL) 120 MMCFD (SSGC)
ZAMZAMA190 MMCFD (SNGPL) 130 MMCFD (SSGC)
KHIPRO 70 MMCFD (SSGC)
DARU 5 MMCFD (SSGC)
SINDH
BHIT 300 MMCFD (SSGC)
BADIN 200 MMCFD (SSGC)
Karachi
6
Pakistan Natural Gas Infrastructure
Peshawar
JAMMU KASHMIR
Islamabad
NWFP
Lahore
Faisalabad
Quetta
PUNJAB
Multan
Sui
India
AC1X-SUI
BALOCHISTAN
Sukkur
Iran
SINDH
Karachi
7
Provincial Share in Historical Gas Production
8
Provincial share 2006-07
Consumption
Production
Total Gas Production 1.414 TCF (3,871 MMCFD)
Total Gas Consumption 1.223 TCF (3,351 MMCFD)
9
Sector-wise Gas Consumption (59 growth in 5
years)
2006-07
2001-02
Total Gas Consumption 1.223 TCF (3,351 MMCFD)
Total Gas Consumption 0.768 TCF (2,014 MMCFD)
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Province-wise Consumption Pattern 2006-07
1,665 MMCFD (50)
117 MMCFD (3)
1,344 MMCFD (40)
225 MMCFD (7)
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Gas Sector Development
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Projected Gas Supply (Without Imports)
MMcfd
Source DGPC
13
Projected Gas Supply (With Imports)
MMcfd
14
Projected Gas Demand (Constrained)
MMcfd
Source SNGPL, SSGCL, DGPC
15
Projected Gas Supply-Demand Balance (Without
Imports)
MMcfd
606
2,215
4,200
6,252
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Projected Gas Supply-Demand Balance (With Imports)
MMcfd
3,792
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Strategy To Bridge The Demand-supply Gap

• Three pronged strategy to bridge the gap
  between gas demand and supply
• Maximize domestic production for which new policy
  has been approved by the Government
• Transnational Pipeline i.e. IPI, TAP and GUSA
• LNG imports through private as well as public
  sector. i.e. Mashal LNG, GasPort, and Granada SBM

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Natural Gas Allocation and Management Policy 2005
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Liquefied Natural Gas
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Liquefied Natural Gas (LNG)

• Government approved LNG Policy, 2006 on 6th
  April,06 under which complete freedom has been
  given to the investors to participate in any
  segment of LNG value chain.
• Main features of LNG Policy 2006
• LNG Project Structure Allow both Integrated or
  Unbundled Project Structures as may deliver best
  results i.e. lowest delivered Regasified LNG
  (RLNG) price for Pakistan.
• Right to Market and Transport RLNG The
  investors allowed freedom to market and transport
  RLNG in Pakistan at their own risk and cost.
• Government Incentives Accelerated depreciation
  for income tax purposes and waiver of import duty
  allowed.
• Licensing required from OGRA OGRA is bound to
  issue license within 90 days for
• Ownership and operations of LNG terminal
• Right to market and sell RLNG
• Using existing pipeline infrastructure if
  available
• Construct and operate gas pipeline if required
• Task Force established to provide one window
  facilitation.

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SSGCLs Pakistan Mashal LNG Project

• Sui Southern Gas Company Ltd (SSGC) is working as
  project facilitator for Pakistans First LNG
  Import project called Pakistan Mashal LNG
  Project.
• The project is in its advance stages and close to
  selection of the Project Company / Developer.
• The Mashal LNG Project is designed to import 3.5
  MTPA of LNG (500 mmcfd gas ) in 2010/11.
• ECC approved integrated project structure for
  this project on 2nd Feb,07 and gave go ahead to
  SSGC to obtain technical and financial proposals
  from the pre-qualified bidders.
• Short listing of the pre-qualified companies
  done
• SSGC sought price proposals from pre-qualifying
  interested bidders on the basis of which
  successful project developer will be selected by
  the end of December 2007.

22
Private Sector LNG import initiatives

• As per LNG Policy 2006, equal opportunity
  provided to private sector investors to import
  LNG and setup LNG terminals at their own risk and
  cost.
• Presently, couple of private sector investor
  namely Pakistan GasPort Ltd. (PGPL, an Associated
  Group Company), and Granada SBM are pursuing LNG
  projects.
• PGPL has signed an implementation agreement with
  Port Qasim Authority to setup an LNG terminal
  with an intent to import upto 400 MMCFD LNG.

23
Gas Prices
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Composition of Consumers Gas Prices

• Wellhead price
• It is paid to the producers in accordance with
  the Petroleum Concession Agreements (PCAs) and
  applicable policy at the wellhead.
• Prescribed price
• It is determined by OGRA after taking into
  account the following elements
• Average well head gas price
• Excise duty at well head
• Operating and maintenance costs
• Depreciation
• Return on assets (ROA) (17.5 SNGPL, 17 SSGCL)
• Selling (Consumers) Price
• It is sum of prescribed price and Gas Development
  Surcharge.

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Consumer Gas Pricing Mechanism
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Breakup of Current Consumers Prices
Current weighted average consumer price is Rs
217.10 per MMBtu
27
Current Consumer Prices of Gas (w.e.f 01.02.2007)
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Liquefied Petroleum Gas
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LPG Industry at a Glance

• Presently around 1650 tons / day of LPG is being
  produced by 10 LPG producers and is being
  marketed by 63 LPG Marketing Companies.
• Around 51 companies have been given provisional
  LPG marketing licenses.
• The combined storage facility of all LPG
  marketing companies is around 28,000 metric tons.
  Two LPG import terminals located at Port Qasim,
  Karachi, are functional.
• EVTL LPG import terminal has storage capacity of
  4500 metric tons and through put capacity of
  100,000 metric tons per annum.
• Progas LPG import terminal has storage capacity
  of 6750 metric tons and through put capacity of
  500,000 metric tons per annum.
• Around Rs 6,000 million of investment has been
  made into PG infrastructure since December, 2006.

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Liquefied Petroleum Gas (LPG)

• Prior to September 2000, Ministry of Petroleum
  Natural Resources (MPNR) was regulating LPG
  business all over the country under LPG (PD)
  Rules, 1971.
• In June 2000 the Cabinet decided to deregulate
  the LPG business.
• Since deregulation the Government is not fixing
  the price for the producers as well as the
  consumers.
• In March, 2003, all LPG regulatory work along
  with LPG (PD) Rules, 2001 were transferred to
  OGRA.
• The role of MPNR is now confined to policy
  formulation only.
• First LPG Production Distribution Policy has
  been introduced in 2006

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Salient Features of LPG Policy 2006

• To ensure that cartels are not formed for
  charging a high consumer price of LPG, OGRA will
  determine the reasonableness of price keeping in
  view the import parity price of LPG, producer
  price and audited accounts of LPG marketing
  companies for the last two years.
• All LPG marketing companies receiving LPG from
  sources in Punjab and NWFP will be obligated to
  supply at least 7 of their local LPG in Northern
  Areas, 7 in AJK and 6 in FATA. All LPG
  marketing companies receiving LPG from sources in
  Sind and Balochistan will be obligated to supply
  at least 10 of their local LPG in Balochistan
  province.
• 80 of LPG produced from Chanda field (OGDCL)
  shall be distributed in FATA.
• Any party can import LPG after paying applicable
  government dues. However, no party can export LPG
  without the prior written approval of MPNR.

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LPG Producer Pricing Formula

• In order to incentivise local LPG producers to
  increase their production and to ensure free flow
  of imported LPG to enhance its availability for
  LPG consumers at affordable prices, the
  government placed a floating cap on the producer
  price of LPG by linking it to the international
  price. The LPG producer pricing formula was
  approved by the ECC of the Cabinet in its meeting
  held on 06.12.2006 is as follow
• The maximum base-stock price of LPG for a given
  month should be equal to FOB Saudi ARAMCO
  Contract Price (CP) for Propane and Butane
  published in PLATTs for that month taking
  Propane-Butane ratio equal to 4060.
• However, for the benefit of the consumers, the
  LPG producers will have complete flexibility and
  authority to sell product at a price on
  commercial considerations in accordance with
  market situation.

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Compressed Natural Gas
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CNG Sector Overview

• Compressed natural gas (CNG) being promoted for
  economic and environmental benefits
• 1,834 CNG stations serving over 1.55 million
  vehicles Pakistan 2nd largest in world, and
  largest in Asia.
• CNG kits and dispensers are being manufactured
  locally
• Cabinet approved replacing diesel buses with CNG
  buses in 8 cities leading to new investment.
• CNG Policy is under finalization.

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Thank You