Shahid Khaqan Abbasi has been arrested over the LNG deal. In this thread I will put forth all facts I know related to LNG deal so you understand this issue in its full context and understand what this man achieved and what it meant for the country (Warning: Very long thread)
Progressive ideas in Pakistan never reach fruition owing to mishandling or corruption. Creating an LNG ecosystem to get desperately needed gas for Pakistan’s economic prosperity was destined to be consigned to the same dustbin of failure; until SKA got involved.
The LNG terminal in question is notable as Pakistan’s first infrastructure success in LNG despite a decade of unsuccessful attempts to import LNG. It was Pakistan’s first and only source of LNG when it launched. This decade of stasis started in 2006 ...
when Pakistan’s first LNG policy was introduced. The focus was on private sector LNG import projects to be undertaken on purely commercial basis with the government shielded from risk by not putting up ANY funds. The entire risk had to be private.
However government committed to support the project to secure LNG for long-term supply guarantee by assuring capacity payments. This meant government would pay for operations even if gas was not used. As politics can burn complex projects such guarantees are necessary and normal
Such guarantees allow private investors to take risk on complex projects. On flip side for this project govt also imposed heavy fines if project was not completed on time. The time demanded for completion was a world record time for such a project as country was in energy crisis
Back to 2006. We had a project that would require a colossal amount of funds, for which no expertise existed in the country, and which could fall victim to regulatory winds and political instability which were common in Pakistan. No one stepped up. The risk was too massive
One company Pakistan GasPort Limited did show the courage to come forward, & while they showed great potential the government’s expectations of requisite pace were aggressive. The government roped in SSGCL to enable the LNG ecosystem in the country.
SSGCL set up the Pakistan Mashal LNG Project. owing to project management complexities and ensuring that guidelines and parameters were perfect for such a critical initiative the project took many years to pass the planning stage. Finally in 2010 a contract was awarded
Dutch firm 4Gas Asia got project through a competitive bidding process. But this being Pakistan contractual amendments were suddenly initiated that caused the project to stall and eventually the matter landed in the Supreme Court.
Upon guarantee of Government to redo the process transparently, Supreme Court dismissed the case. It was now 2011 and serious gas shortages were hitting Pakistan hard causing widespread misery esp among the poor. This was on top of the general economic malaise that had...
...seen the country average a growth rate of just 2.9% from 2008-2011. The government rushed out an upgraded version of the 2006 policy that added further incentives for private sector. Finally in 2013 we got a tender via Inter State Gas Systems.
This was an open and competitive tender for development of an LNG terminal. Bidders participated in the single step, two envelope bidding process in a fair, transparent process that abided by strict PPRA rules. To ensure technical alignment and standards...
...an independent, professional, international firm QED Consulting evaluated all technical bids. Of the two bidders, a local conglomerate known for complex project excellence won the bid with the most competitive bid.
Resulting LNG Services Agreement was approved by the ECC, the SSGC Board, & by the Cabinet in an auditable & transparent manner. This transparency was further validated when the World Bank owned International Finance Corporation (IFC) eventually took a 20% stake in the terminal
Terminal has amongst the most competitive tolling rates in the world. The standard unit for gas measurement is called an MMBTU. At 400 Million standard cubic feet per day (MMSCFD) the tolling rate for terminal was USD .66 per MMBTU and at 630 MMSCFD it is just USD .4969 per MMBTU
In comparison terminals in Indonesia range from USD 1.5 to 2.58, terminals in China range from USD 1.5 – 2, the Kochi terminal in India was over USD 1, and Korean and Japanese terminals were between USD .8-1. But it still had to be built. Here is what SKA ensured:
Unlike last time all resistance from people who had sabotaged it last time was negated. He worked tirelessly to ensure success with all parties. He pushed the winner hard so the LNG Terminal project was completed in a world record 330 days for such a project!
The terminal was one of just 15 in the world operating such advanced terminal storage and regassification technology. The terminal quickly moved to 95%+ capacity making government's capacity payments costs negligible. According to sources at Ministry of Petroleum...
...in 2 years Pakistan has saved approximately USD 1.7 Billion Dollars by importing LNG that is cheaper than Furnace Oil which was the major fuel used to run Pakistan’s power plants. LNG is also the cleanest burning hydrocarbon and the greenest fossil fuel
Compared to furnace oil it is more efficient in power generation, has much lower operational costs and thus contributes most to lower energy prices to end customer. Pakistan had a gas deficit of approximately over 2.5 billion cubic feet when terminal launched
The terminal quickly reduced this deficit by 20 to 25% making the first major dent in Pakistan’s yawning energy gap in its recent history. With induction of LNG into country’s gas distribution network, Government brought 2,200MW of power generation online...
...by switching it from expensive liquid fuels. This enabled the govt to address energy crisis through investment in new gas fired power plants for additional 3,600 MW power generation capacity whose benefits we are reaping today. Remember capacity payments?
Govt was making them to FIVE Independent Power Producers despite them operating at zero to 50% of capacity. Supply of gas enables these units to raise their production with gas to diesel arbitrage bringing per unit production costs down saving govt insane cash
Many other benefits but Im at tweet thread limit. Bottom line: In this country that constantly shoots itself one competent man took on a project for nation's benefit in a sector with history of failure. He delivered. Nation benefited massively. He's a hero. We put him in jail 🤷♀️
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