Gas Sector in Pakistan

1. Gas Sector in Pakistan

2. 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 consumer’s 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;

3. Pakistan Energy Supply Mix – 1992 to 2006 Total Primary Energy Supplies : 57 MTOE

4. Natural Gas

5. Major Gas Supply Sources Mingora Peshawar MAKORI 25 MMCFD (SNGPL) JAMMU & KASHMIR Islamabad NORTHERN SOURCES 125 MMCFD (SNGPL) CHANDA 8-17 MMCFD (SNGPL) Mirpur QADIRPUR 550 MMCFD (SNGPL) GURGURI 50 MMCFD (SNGPL) NWFP DHODAK 40 MMCFD(SNGPL) BADAR 12 MMCFD (SNGPL) Lahore PUNJAB PIRKOH + LOTI 42 MMCFD (SNGPL) Quetta HASSAN 20 MMCFD (SNGPL) Multan SUI430 MMCFD (SNGPL) 110 MMCFD (SSGC) MIANO, KANDANWARI 140 MMCFD (SSGC) Sui BALOCHISTAN REHMAT 30 MMCFD (SNGPL) MAZARANI 10 MMCFD (SSGC) Sukkur KANDHKOT 50 MMCFD (SNGPL) SAWAN 280 MMCFD (SNGPL) 120 MMCFD (SSGC) ZAMZAMA190 MMCFD (SNGPL) 130 MMCFD (SSGC) KHIPRO 70 MMCFD (SSGC) DARU 5 MMCFD (SSGC) SINDH BHIT 300 MMCFD (SSGC) BADIN 200 MMCFD (SSGC) Karachi

6. Pakistan Natural Gas Infrastructure Gas Field SSGCL Lines SNGPL Lines Compressor Stations Major Load Centre Peshawar JAMMU & KASHMIR Islamabad NWFP Lahore Faisalabad Quetta PUNJAB Multan Sui India AC1X-SUI BALOCHISTAN Sukkur Iran SINDH Karachi

7. Provincial Share in Historical Gas Production

8. Provincial share 2006-07 Consumption Production Total Gas Production : 1.414 TCF (3,871 MMCFD) Total Gas Consumption : 1.223 TCF (3,351 MMCFD)

9. Sector-wise Gas Consumption (59% growth in 5 years) 2006-07 2001-02 Total Gas Consumption: 1.223 TCF (3,351 MMCFD) Total Gas Consumption: 0.768 TCF (2,014 MMCFD)

10. Province-wise Consumption Pattern 2006-07 1,665 MMCFD (50%) 117 MMCFD (3%) 1,344 MMCFD (40%) 225 MMCFD (7%)

11. Gas Sector Development

12. Projected Gas Supply (Without Imports) MMcfd Source: DGPC

13. Projected Gas Supply (With Imports) MMcfd

14. Projected Gas Demand (Constrained) MMcfd Source: SNGPL, SSGCL, DGPC

15. Projected Gas Supply-Demand Balance (Without Imports) MMcfd 606 2,215 4,200 6,252

16. Projected Gas Supply-Demand Balance (With Imports) MMcfd 3,792

17. 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

18. Natural Gas Allocation and Management Policy 2005

19. Liquefied Natural Gas

20. 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.

21. SSGCL’s Pakistan Mashal LNG Project • Sui Southern Gas Company Ltd (SSGC) is working as project facilitator for Pakistan’s 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.

22. 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.

23. Gas Prices

24. 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. • Prescribed price: • It is determined by OGRA after taking into account the following elements • 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.

25. Wellhead Price Gas Producers Prescribed Price SNGPL SSGCL Consumers’ Price Consumers Consumers Direct Sale Consumer Gas Pricing Mechanism

26. Breakup of Current Consumers’ Prices Current weighted average consumer price is Rs 217.10 per MMBtu

27. Current Consumer Prices of Gas (w.e.f 01.02.2007)

28. Liquefied Petroleum Gas

29. LPG Industry at a Glance • Presently around 1650 tons / day of LPG is being produced by 10LPG 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.

30. 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;

31. 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.

32. 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.

33. Compressed Natural Gas

34. 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.

35. Thank You