Major fault in new LNG terminal disrupts gas supplies

KARACHI: Pakistan’s second liquefied natural gas (LNG) re-gasification terminal at Port Qasim inaugurated by Prime Minister Shahid Khaqan Abbasi a fortnight ago suffered a serious technical fault at an underground pipeline, resulting in a failure to inject re-gasified LNG into the system.

This may lead to the cancellation of a few lined-up cargoes over the next few weeks, industry sources told Dawn on Wednesday.

Two ships carrying LNG were waiting for delivery at the floating storage and re-gasification unit (FSRU) when the incident ruptured an underwater pipeline while building gas pressure from LNG from the third shipment.

Insiders said this puts a question mark on the quality of the FSRU and the associated infrastructure, including the pipeline network. They said the initial testing should have been completed at least 50 per cent higher pressure i.e. above 1,500 pounds per square inch (PSI). The pipeline suffered the setback below 1,000 PSI.

The second LNG terminal has been developed by a consortium led by Pakistan Gas Port Ltd (PGPL). Fasih Ahmed, spokesperson and one of the directors of PGPL, did not respond to phone calls and questions for comment.

A source working close to PGPL’s FSRU said the gas leak incident was so serious that an emergency mechanism was put in place. It would need a minimum of 10-15 days to reach the stage where it faced the problem and again build the gas pack pressure.

He said a number of other shipments would also be deferred, cancelled or diverted. Authorities concerned were in talks with suppliers for an acceptable way out in the interest of long-term contracts or else they would be compelled to declare force majeure. The challenge can create gas shortages amid increasing winter demand. Many towns in Punjab were already facing gas pressure problems.

The prime minister inaugurated the re-gasification unit on Nov 20 that was already delayed for almost six months. PGPL and state-owned entities are fighting liquidity damages imposed by Pakistan LNG for the delayed commissioning through arbitration even though the prime minister had supported PGPL’s position.

The government had been postponing shipments of LNG secured in January through a competitive bidding from Gunver and ENI because of the infrastructure shortfalls. It had already delayed LNG cargoes for October originally planned for July.

The LNG shipment from the second terminal was expected to be fed to three mega LNG-based power projects in Punjab – Bhikki, Balloki and Haveli Bahadur Shah – of 1,200-megawatt each.

“Under the agreement, June 30 was the commercial operation date (COD), which is yet to officially take place and has been delayed further,” an official said.

Mr Abbasi had himself ordered the COD to be delayed until September.

A PGPL spokesman had earlier attributed the delayed COD to the inability of the state-run entities to complete a small 400-metre government-owned pipeline.

Under the agreement, the contractor of the second terminal is liable to liquidity damages at the rate of about $272,000 for each day of delay beyond June 30.

The consortium led by PGPC had won the contract through a competitive bidding at terminal charges of about 42 cents per million British thermal units last year compared to 66 cents for the first terminal of Engro, which recently revised the rate to 47 cents per unit for total supplies of 630 million cubic feet per day.

Published in Dawn, December 7th, 2017