Renewables on the burner as gas pipeline dominates Imran Khan’s trip to Russia – Reuters
The visit could lay the groundwork for Russia building a pipeline to transport natural gas from Karachi to Lahore.
The arrival of Pakistani Prime Minister Imran Khan in Russia has been dramatically overshadowed by the entry of Russian forces into Ukraine.
The geostrategic consequences for Pakistan of the two day visit in Moscow, the first of a Pakistani Prime Minister in 23 years, risk being analyzed through the hardening positions of the many players in the current conflict.
The long-term consequences, however, have almost everything to do with the future of natural gas.
Khan’s visit comes just after Germany, the top consumer of Russian gas, stopped certification of a new Nord Stream 2 pipeline. Russia recently agreed to a 30 years contract to supply gas to China, coinciding with President Vladimir Putin’s visit to the Winter Olympics in Beijing.
As Russia seeks new customers for its building technology and fossil fuels, and as Pakistan desperately seeks a secure and cheap supply of natural gas, the visit could lay the groundwork for Russia building a pipeline to transport natural gas from Karachi to Lahore.
Russia is the world’s second largest producer of natural gas. Meanwhile, Pakistan, whose gas reserves are dwindling, faces a major supply problem gas still constituting an important part of its energy mix.
Pakistani Energy Minister Hammad Azhar speaking to The third polesaid the trip was just an “opportunity to learn the technology” of laying a gas pipeline from the Russians, who he says are the best in the business.
Pakistan wants to build a 1,100 kilometer gas pipeline, known as the Pakistan Stream Gas Pipeline Project, from Port Qasim in Karachi, Sindh, to Kasur in Punjab. The $2.5 billion project is tentatively set to start next year, although a first deal was first signed in 2015 and a second in 2021.
“We don’t have the expertise of the scale and size needed for this project,” Azhar said. The third pole by phone from Islamabad. “The project will remain majority-owned [74 per cent] by Pakistan to begin with, so it could be a win-win,” he said.
Former Prime Minister Shahid Khaqan Abbasi, who dreamed up the project in 2013 when he was oil and natural resources minister, agreed. The project had been dormant due to various “financial bottlenecks”, Abbasi said.
“My fear is that this government will face the same hurdle as us and will not be able to justify the build-operate-transfer price structure of the amount to be paid to the Russians for the amount of gas flowing through the new pipeline” , warned Abbasi. , referring to a model in which large projects are financed and developed through public-private partnerships.
Increase in demand, decrease in supply
Pakistan’s natural gas production peaked in 2009, according to the International Energy Agency, but gas has continued to rise steadily as a percentage of total energy supply since then. It has led to a slow crisis as Pakistan scrambles to make up the difference.
Major cities are increasingly facing prolonged gas outages, hitting residents and businesses hard. In December last year, the government said the country would soon run out of local gas, increasing dependence on expensive imported gas.
As a former energy minister, Abbasi saw importing liquefied natural gas (LNG) as a quick fix to the energy crisis caused by a decline in domestic gas production.
“We tried to bring gas through a pipeline from Iran, but that was subject to US sanctions and another from Turkmenistan, but even that couldn’t happen, mainly for security reasons because he had to go through Afghanistan,” he said. The third pole.
“We need this pipeline because we need more LNG,” current Energy Minister Azhar said. “It’s a project that all my predecessors struggled to put in place. If the current government will not rush, it will not hesitate to be decisive either.
Former Prime Minister Abbasi is no longer sure Pakistan needs the pipeline.
“Local gas has run out so much and existing terminals are operating at 60pc capacity. The current pipeline network is sufficient to transport local and imported gas for now,” he said.
Weak infrastructure, interrupted supplies
The question is really whether Pakistan will continue to invest in gas infrastructure. This is why the trip to Russia, and a possible deal, is so important to Pakistan’s energy future.
“Today, 60% of LNG is used by the three power plants, the remaining 40% by the industrial sector,” Azhar said. Due to the depletion of local gas, a “swarm of new customers” – including fertilizer and cement factories – have come to rely on LNG.
Currently, 4.5 million tonnes of LNG are imported annually from Qatar Energy, with whom Pakistan has long-term contracts. The country is buying more from Italian oil and gas giant ENI and commodities trader Gunvor.
This is still not enough for Pakistan.
Over the past two years, Azhar said, as gas reserves have shrunk by 9% per year, more and more import industries have turned to LNG to keep their plants running.
The demand is there, but not the infrastructure to meet it.
Pakistan has two LNG terminals: Engro Elengy Terminal Limited (EETL) and PGP Consortium Limited (PGPCL), in Port Qasim, built in 2015 and 2017 respectively.
As the 2023 election approaches, the government’s desperation to end gas shortages is measured by the Prime Minister’s ordering the Department of Energy to build a third terminal by the end of 2023.
But Pakistan’s problem does not end there.
This winter, after two suppliers under long-term contracts – ENI and Guvnor – failed to deliver, Pakistan had to buy at an exorbitant price $30.6/mmbtu from Qatar Energy to meet demand.
“We will continue to face an immense shortage of gas due to domestic exhaustion, so we must turn to LNG for relief. It is, after all, the most important primary fuel for Pakistan,” said Khurram Hussain, a leading business and economics journalist, “and that’s why the pipeline is important” for the country.
Forget about a green energy future
In its rush to overcome gas shortages, however, the government appears to have forgotten its promises of a cleaner, greener way to run the country.
Vaqar Zakaria, director of environmental consultancy Hagler Bailley Pakistan, said while in the past it made sense to invest in LNG, it is far too expensive today.
LNG was once “the cheapest and cleanest of fossil fuels”, he said, and Pakistan had ready-to-use gas infrastructure.
But, he added, Pakistan failed to realize that with coal and oil having a “bad reputation”, the world would turn to gas to replace relatively dirtier fuels, and that with an increase in global demand, the price of gas would naturally rise. .
It is time, he said, to tap into the country’s “abundant wind and solar potential” and not depend on imported gas for power generation.
It is also likely to be much cheaper to switch to solar and wind.
Haneea Isaad, research associate at the Institute for Energy Economics and Financial Analysis, calculated that a floating offshore LNG terminal would cost between $400–500 million.
“I don’t take into account the operational expenses and the costs of imported fuel,” she said, speaking to The third pole.
By comparison, at $600,000 per megawatt (MW), installing a 1,000 MW solar plant would cost almost the same as a single LNG terminal, she said.
Additionally, lifecycle greenhouse gas emissions from wind and solar power are only a fraction of those associated with LNG. “Not to mention the added benefit of being available domestically and having negligible marginal costs,” Isaad said.
Claims that LNG is cleaner than coal should be treated with caution, according to Issad.
“In the short term, it could actually turn out to be more harmful than coal if we look at things from a life cycle perspective,” she said, adding that from the well to burning the actual fuel in power plants, all LNG supply leads to carbon dioxide or methane emissions.
“Over a 20-year period, methane can be 80 times more potent than carbon dioxide,” she said.
For resource-constrained Pakistan, it may not yet be too late to pull the money out of LNG and invest in climate-friendly renewable energy.
This article was originally published on The third pole and has been reproduced with permission.
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