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Non Issuance of LoI Delays First-Ever LNG Terminal At Port Qasim Special Zone

KARACHI: The Port Qasim Authority (PQA) has failed to issue the required letter of interest (LoI) to the Japanese firm willing to invest $400 million to set up a liquefied natural gas (LNG) terminal at a special LNG Zone under the guidelines of LNG Policy 2011.

According to Saad Ahmed Kazi of Tabeer Energy — the local representative of Mitsubishi — the firm has been working to secure a LoI to set up the first-ever LNG terminal at the dedicated LNG Zone equipped with separate navigation channel for the last six months but the approval is being delayed by the PQA.

He said that the firm has strictly followed the LNG Policy 2011 including PQA guidelines for the establishment of LNG project on a build-operate-and transfer basis and has also completed technical studies by incurring a cost of $10 million but the PQA has failed to award the LoI.

The 180-days delay is not only a contravention of the LNG Policy 2011, wherein it is stated that the PQA must convey its decision on proposal within 30 days, but is also immensely discouraging to foreign investors who are bringing in the much-needed Foreign Direct Investment (FDI) into the country.

Attempts were made to contact Acting Chairman PQA Asad Rafiq Chandna to get his version, but he did not reply to phone calls as well as SMS.

According to official documents available with Dawn, the investor has committed to set up navigational channel for the approach of exclusive LNG terminal (at Chann Wadoo) at its own cost and is also willing to install a multi-user pipeline and procure its own tugs. The Japanese investor has already obtained provisional no objection certificate (NOC) from PQA as well as provisional pipeline capacity approval from Ministry of Energy.

However, the PQA has also told the Japanese investor that the port is going to undertake ‘Technical Study’ to identify “LNG Zone” within port limits for establishment of all prospective LNG terminals.

But industry sources raised objections that since the LNG Zone had already been declared in 2011 as per the PQA board meeting then what was the reason for this delay. In fact, the documents disclose that in the same PQA meeting it was also decided that none other than the existing LNG terminal projects will be allowed to be constructed in the existing channel.

Above all the admiralty charts of the PQA till this day demarcate the LNG Zone to the area that constitutes a portion of the Chann Wadoo Creek and the Jhaari Creek.

As per preliminary plan, the LNG terminal at the specified zone would start functioning by end of next year provided due processing of the project was timely allowed. There are three other LNG projects in the pipeline to be set up at the main channel which is already congested.

The cost of setting up LNG terminal at main channel is at around $125-130m whereas the cost of the terminal proposed by the Japanese investor comes to around $400m because the operator is also going to lay down multi-user pipeline which is far away from the Sui Southern Gas Company tie-in-point (TIP).

Sources in the shipping industry have warned that PQA’s main channel is not feasible for additional LNG terminals because of severe traffic congestion. And in order to accommodate more LNG terminals; the government will have to spend around $300m for dredging 20m cubic meters.

Currently, two LNG terminals are operating in the PQA main channel and three are in the pipeline but even if these terminals are allowed to set-up at the site, at least two years would be required for dredging.

 
   
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