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Gas Sector in Pakistan

Presentation in Board of Investment


Islamabad - November 20, 2007

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;

Pakistan Energy Supply Mix 1992 to 2006


Total Primary Energy Supplies : 57 MTOE
35

Oil
30 25

Gas

LPG

Coal

Hydro+Nuclear Electriciy

50.4%

Million TOE

20

28.4%
15 10 5 0

13.8% 7.0% 0.4%

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Natural Gas

Major Gas Supply Sources


MAKORI 25 MMCFD (SNGPL) Peshawar

MMCFD SNGPL 1,958

Share System 63%

Share Total 50%

SSGCL
Mingora

1,150
3,108 763 3,871

37%
100%

29%
79% 21% 100%

Indept. Islamabad
Mirpur

CHANDA 8-17 MMCFD (SNGPL)


GURGURI 50 MMCFD (SNGPL)

NORTHERN SOURCES 125 MMCFD (SNGPL)

QADIRPUR 550 MMCFD (SNGPL)

DHODAK 40 MMCFD(SNGPL)

Lahore

BADAR 12 MMCFD (SNGPL)

PIRKOH + LOTI 42 MMCFD (SNGPL) SUI 430 MMCFD (SNGPL) 110 MMCFD (SSGC) MAZARANI 10 MMCFD (SSGC) KANDHKOT 50 MMCFD (SNGPL) ZAMZAMA 190 MMCFD (SNGPL) 130 MMCFD (SSGC) BHIT 300 MMCFD (SSGC)

Quetta

HASSAN 20 MMCFD (SNGPL)

Multan MIANO, KANDANWARI 140 MMCFD (SSGC)

Sui

Sukkur

REHMAT 30 MMCFD (SNGPL) SAWAN 280 MMCFD (SNGPL) 120 MMCFD (SSGC) KHIPRO 70 MMCFD (SSGC) DARU 5 MMCFD (SSGC)

Karachi

BADIN 200 MMCFD (SSGC)

Pakistan Natural Gas Infrastructure


Peshawar

ITEM Transmission (KM)

SNGPL 6,729

SSGC 3,294

TOTAL 10,023 Islamabad

Distribution (KM)
Towns / Villages No.

52,932
1,019

30,173
1,533

83,105
2,552

Lahore Faisalabad Quetta

Multan

Sui
AC1X-SUI

Sukkur

Gas Field SSGCL Lines SNGPL Lines Compressor Stations

Karachi

Major Load Centre

Provincial Share in Historical Gas Production

4000 3500 3000

3,871

MMCFD

2,737
2500

2,241
2000 1500 1000 500 0

1,419 836 485 99

1,077 1,016 148 871 192 71

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Balochistan

NWFP

Punjab

Sindh

Total

2007

Provincial share 2006-07

Production

Consumption
Balochistan , 225, 7% NWFP, 117, 3%

Sindh, 2,738, 70%

Balochistan , 872, 23%


Sindh, 1,344, 40%

NWFP, 72, 2% Punjab, 191, 5%

Punjab, 1,665, 50%

Total Gas Production : 1.414 TCF

Total Gas Consumption : 1.223 TCF

(3,871 MMCFD)

(3,351 MMCFD)

Sector-wise Gas Consumption (59% growth in 5 years)


2001-02
Transport, 12, 1% Domestic, 386, 18% Comm., 56, 3%

2006-07
Transport, 155, 5% Power, 1,453, 43% Domestic, 512, 15%

Power, 771, 36%

Gen. Industry, 343, 16% Pakistan Steel, 37, 2% Fertilizer (Fuel), 117, 6% Cement, 19, 1% Fertilizer (Feed) 13%
Fertilizer (Fuel), Fertilizer (Feed) 13% 110, 3%

Comm., 86, 3% Gen. Industry, 530, 16% Pakistan Steel, 45, 1% Cement, 40, 1%

Total Gas Consumption: 0.768 TCF (2,014 MMCFD)

Total Gas Consumption: 1.223 TCF (3,351 MMCFD)

Province-wise Consumption Pattern 2006-07


1,665 MMCFD (50%) 117 MMCFD (3%) 1,344 MMCFD (40%) 225 MMCFD (7%)

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Punjab NWFP Sindh Balochistan Transpot Power Fertilizer Cement Gen. Industry Commercial Domestic

Gas Sector Development

30.06.2001 No. of Towns/Villages Transmission (km) Distribution (km) Gas Sales (MMCFD) No. of Customers Industrial Commercial Domestic Punjab Domestic consumers &age of population benefiting 4,434 46,113 3,401,783 NWFP Sindh 1,414 7,444 56,208 1,411

30.09.2007 2,552 10,023 83,105 3,351 7,756 67,649 4,889,922

%age increase 80% 35% 48% 137% 75% 47% 44% Pakistan

Balochistan

2,597,017

352,691

1,770,221

169,993

4,889,922

19%

11%

27%

14%

20%

Projected Gas Supply (Without Imports)


MMcfd

7,000

6,000

Committed

Anicipated

5,000

Anic

ipate

4,000

3,000

2,000

Committed

1,000

0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Source: DGPC

Projected Gas Supply (With Imports)


MMcfd
7,000

6,000

5,000

Anic ip

ated

4,000

LN G(

FT LNG ) I

LNG

II

IPI

3,000

Committed
2,000

1,000

Committed
0 2007 2008 2009 2010

Anicipated
2011 2012 2013

LNG (FT)
2014 2015 2016

LNG I
2017 2018

LNG II
2019 2020

IPI
2021 2022 2023 2024 2025

Projected Gas Demand (Constrained)


8,000

MMcfd

7,000

6,000

Transport (CNG)

MMscf / Day

Captive power

5,000

4,000

Power Fertilizer Cement

3,000

2,000

Gen. Industry

1,000

Commercial Domestic

0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Domestic Cement Captive power

Commercial Fertilizer Transport (CNG)

Gen. Industry Power Others Source: SNGPL, SSGCL, DGPC

Projected Gas Supply-Demand Balance (Without Imports)


MMcfd
8,000

7,000

6,000

606
5,000 Anicipated 4,000

2,215 4,200
Gap

6,252

3,000

2,000 Committed 1,000

0 2007

2008 2009

2010 2011

2012 2013

2014 2015

2016

2017 2018

2019 2020

2021 2022

2023 2024

2025

Committed

Anicipated

Gap

Projected Gas Supply-Demand Balance (With Imports)


MMcfd
8,000

7,000

6,000 IPI 5,000 Anicipated 4,000 LNG (FT) LNG I LNG II

Gap

3,792

3,000

2,000 Committed 1,000

0 2007

2008 2009

2010 2011

2012 2013

2014 2015

2016

2017 2018

2019 2020

2021 2022

2023 2024

2025

Committed

Anicipated

LNG (FT)

LNG I

LNG II

IPI

Gap

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

Natural Gas Allocation and Management Policy 2005

CATEGORY OF CONSUMERS Domestic and Commercial Sectors


I. II.

PRIORITY ORDER
First Second Third

Fertilizer Sector; and Industrial Sector (to the extent of process gas)

Independent Power Plants as well as WAPDA and KESCs Power Plants with firm gas supply commitments under GSAs
I. II. III.

General Industrial Sector CNG Sector Captive Power (for export-oriented textile units)

Fourth

I.

II.

WAPDA and KESCs Power Plants (other than those included in Third Priority Order) Captive Power Sector (other than that for export-oriented textile units)

Fifth

Cement Sector

Sixth

Liquefied Natural Gas

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.

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.

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.

Gas Prices

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. It is determined by OGRA after taking into account the following elements

Prescribed price:

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.

Consumer Gas Pricing Mechanism

Wellhead Price

Gas Producers

Prescribed Price

SNGPL

SSGCL

Consumers Price

Consumers

Consumers

Direct Sale

Breakup of Current Consumers Prices


ROA 5% GDS 1%

Depreciation 3% T&D 8%

Cost of Gas 83%

Current weighted average consumer price is Rs 217.10 per MMBtu

Current Consumer Prices of Gas


(w.e.f 01.02.2007)

Domestic Sector: Over 0-50m3 per month Over 50-100m3 per month Over 100-200m3 per month Over 200-300m3 per month Over 300 m3 per month Commercial Consumers Industrial Consumers

Rs./million Btu 78.38 82.07 149.40 239.01 310.92 268.23 238.38

CNG
Cement Factories Fertilizer Companies: Feed stock: New Old Fuel: Power Sector including Captive Power:

264.87
305.15

36.77 91.52 238.38 238.38

Liquefied Petroleum Gas

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.

Liquefied Petroleum Gas (LPG)

Prior to September 2000, Ministry of Petroleum & Natural Resources (MPNR) was regulating LPG business all over the country under LPG (P&D) 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 (P&D) 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;

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.

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 40:60. 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.

Compressed Natural Gas

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.

Thank You