Sunday, October 1, 2023

Investors are opposed to unlimited expansion of LNG terminal capacity

The sponsors of forthcoming new ‘integrated’ liquefied natural gas (LNG) terminals have resisted limitless capacity augmentation to current government-guaranteed ‘unbundled LNG terminals, claiming that such a move would monopolize the market and discourage fresh investment in merchant terminals.

Tabeer Energy Pakistan Limited (TEPL), a 100% subsidiary of Mitsubishi Corporation of Japan, warned the Oil & Gas Regulatory Authority (Ogra) in a letter that the draught LNG Terminal Access Rules and Codes would “discourage new LNG terminal investors seeking to build integrated projects” at Port Qasim without any government guarantee.

Tabeer is one of two planned integrated LNG terminals that are nearing the end of the final investment decision process. The draught LNG terminal access rules and code would not effectively promote competition in terms of terminal capacity contracting and subsequent sales of regasified liquefied natural gas (RLNG) from such terminals, according to Tabeer, and would be incompatible with the current and planned navigational access to Port Qasim.

According to Tabeer, LNG terminals built thus far have been built on an “unbundled” basis, with the government guaranteeing throughput and therefore the capacity fee. However, the new “integrated” LNG terminals given licenses of the same title by Ogra were required to bear the full throughput risk without any kind of state backing or guarantee.

It stated that granting an “unbundled” project formed through a government tender the power to assign such capacity while also being involved in the sale of RLNG would result in a conflict of interest situation in which the buyer and seller were the same company.

Furthermore, such a scenario would deter prospective LNG terminal investors from developing integrated projects utilizing a Floating Storage Regasification Unit, which can simply be chartered or ordered with greater capacity. If Ogra allows capacity improvements on current terminals to continue without restriction, existing terminals in the main channel may possibly expand indefinitely and without limit, clogging the main channel at Port Qasim and straining the LNG supply chain.

Allowing terminals to develop beyond what their building or operation licenses allow and without a ceiling would also be incompatible with the port’s present and planned navigational access. “It is widely known and recorded that the main channel at the Port is already under significant stress when processing LNG tankers at existing terminal capacities,” Tabeer stated.

TEPL stated that it was obligated to pay a concession fee of $10 million to the Port Qasim Authority and that it had previously spent millions of dollars on technical research to verify that the terminal was in accordance with LNG Policy 2011, OGRA Rules 2007, and other applicable regulatory legislation.

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