Pakistan's Insatiable Appetite For Energy

Pakistan's consumption of oil and gas has rapidly grown over the last 5 years, an indication of the nation's accelerating economic growth. Pakistan is among the fastest growing LNG markets, according to Shell 2017 LNG report.

Pakistan Oil Consumption in Barrels Per Day. Source: CEIC.com

Oil consumption in Pakistan has shot up about 50% from 400,000 barrels per day in 2012 to nearly 600,000 barrels per day in 2017. During the same period, Pakistan's gas consumption has risen from 3.5 billion cubic feet per day to nearly 4 billion cubic feet per day, according to British Petroleum data.

Pakistan is among the fastest growing LNG markets, according to Shell 2017 LNG report.  The country has suffered a crippling energy shortage in recent years as demand has risen sharply to over 6 billion cubic feet per day,  far outstripping the domestic production of about 4 billion cubic feet per day. Recent LNG imports are beginning to make a dent in Pakistan's ongoing energy crisis and helping to boost economic growth. Current global oversupply and low LNG prices are helping customers get better terms on contracts.

Pakistan Gas Consumption in Billions of Cubic Feet Per Day. Source:...

Since the middle of the 18th century, the Industrial Revolution has transformed the world. Energy has become the life-blood of modern economies. Energy-hungry machines are now doing more and more of the work at much higher levels of productivity than humans and animals who did it in pre-industrial era.

Every modern, industrial society in history has gone through a 20-year period where there were extremely large investments in the energy sector, and availability of ample electricity made the transition from a privilege of an urban elite to something every family would have. It seems that Pakistan is beginning to recognize it. If Pakistan wishes to join the industrialized world, it will have to continue to do this by having a comprehensive energy policy and making large investments in the power sector. Failure to do so would condemn Pakistanis to a life of poverty and backwardness.

Pakistan is heavily dependent on energy imports to drive its economy. These energy imports put severe strain on the country's balance of payments and forces it to repeatedly seek IMF bailouts.

Pakistan needs to develop export orientation for its economy and invest more in its export-oriented industries to earn the hard currencies it needs for essential imports including oil and gas. At the same time, Pakistan is stepping up its domestic oil and gas exploration efforts.  American energy giant Exxon-Mobil has joined the offshore oil and gas exploration efforts started by Oil and Gas Development Corporation (OGDC), Pakistan Petroleum Limited (PPL) and Italian energy giant ENI.

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Comment by Riaz Haq on June 24, 2021 at 8:55pm

Pakistan’s new pipeline with Russia to increase LNG import capacity

https://www.worldoil.com/news/2021/1/4/pakistan-s-new-pipeline-with...


Pakistan will start building a 1,100 kilometer (684 miles) pipeline in July with Russia that will allow the South Asian nation to operate more liquefied natural gas terminals.

The South Asian nation will have a majority share of 51% to 74% in the project, while Russia will own the remainder, Nadeem Babar, petroleum adviser to the prime minister, said in an interview on Dec. 14. Pakistan’s gas distribution companies Sui Southern Gas Co. and Sui Northern Gas Pipelines Ltd., which have started acquiring land for the pipeline, will be a part of the project, while a Russian consortium will lead construction.

Pakistan has become one of the top emerging markets for the super-chilled fuel in recent years as domestic gas production has plateaued, forcing the nation to import cargoes. The nation has also auctioned a record 20 oil and gas blocks to encourage exploration activity, with bids expected by mid-January, said Babar.

Pakistan, which imported its first cargo five years ago, currently has two LNG terminals. It’s running the two terminals at capacity to meet peak winter demand, with 12 cargoes secured for December and 11 for January, Babar said. Two more LNG terminals, Energas and Mitsubishi’s Tabeer Energy, are expected to start in the next few years.

Pakistan has LNG deals for 700 million cubic feet a day and Prime Minister Imran Khan’s government will decide if the nation needs another medium-term LNG contract for five years after reviewing demand from power generators, the biggest consumers of the fuel, in the next three months, said Babar.

The nation has also decided that it will only import cleaner Euro-5 diesel from January after doing the same for gasoline earlier this year. Besides imports, Pakistan also plans to add 150 million cubic feet a day of domestic gas output this month, including 50 mmcfd from the Mari gas field, Babar said.

Comment by Riaz Haq on June 25, 2021 at 7:22am

#Pakistan gets $4.5 billion facility for #oil, #LNG imports. 3-year trade financing facility from Jeddah-based #Islamic Trade Finance Corporation (ITFC) will cover import cost of crude, petroleum products and liquefied natural gas (LNG). #SaudiArabia https://www.dawn.com/news/1631303

A formal financing framework agreement on the arrangement would be signed early next week here, informed sources told Dawn. The funds would be utilised under Annual Financing Plan of roughly $1.5bn each. This trade financing arrangement is in addition to about $531 million already signed by Ministry of Economic Affairs with Saudi Fund for Development (SFD) for project financing of Mohmand dam, a couple of coal based projects besides a few hydropower projects including two in Azad Kashmir.

The ITFC’s financing would be utilised over three years (2021-23) by Pak-Arab Refinery Ltd (Parco), Pakistan State Oil (PSO) and Pakistan LNG Ltd (PLL) for import of crude oil, refined petroleum pro­ducts and LNG and help augment the country’s foreign currency reserves and provide resources to meet the oil import bill.

Pakistan’s oil import bill has amounted to about $10bn in first 11 months of the current fiscal year but has been rising in recent months because of increasing trend in the international oil prices. In first 11 months, Pakistan has imported about $2.5bn each worth of LNG and crude oil besides $4.5bn worth of refined petroleum products.


ITFC is a member of the Islamic Development Bank Group and provides trade financing to member countries after putting together funds from financial institutions in the Middle East. The sources said Pakistan had last year signed a $1.1bn trade financing facility for the current year but could not be fully utilised due to lower international oil prices, depressed demand in Pakistan and limitations of the refineries in availing Arabian Crude.

The sources said the financing cost for the upcoming financing facility would be lower than the existing one given substantial surplus liquidity of the banks in the United Arab Emirates and Saudi Arabia because of constrained business activities in the wake of ongoing Covid-19 wave. The existing facility envisaged 2.3pc plus London Inter-Bank Offered Rate (Libor).

The source said the two sides may cover the agricultural commodities as well including DAP fertiliser in addition to existing pipeline of crude, oil products and liquefied natural gas. The sources said the ITFC had also committed in April 2018 a similar financing line for Pakistan for 2018-20 but utilisation finally could not cross $3bn as private refineries were unable to import crude under the facility as it was mostly limited to Parco and to some extent PSO.

Before 2018, the ITFC’s financing was available only to Pak-Arab Refinery which was expanded to Pakistan State Oil in 2018. Last year, PLL was also included in the arrangement for the first time. ITFC had a limited portfolio of about a billion dollars of its own and normally arranged funds from other private financial institutions. Some of the other major recipients of the ITFC’s trade facility have been Indonesia, Egypt and Bangladesh.

The facility is expected to provide relief in oil and gas import bill and ease pressure on foreign exchange reserves. Under the facility, funds do not come into Pakistan’s account but ease pressure on foreign exchange reserves. These funds would be used for financing of letters of credit for oil and LNG imports by PSO, Parco and PLL.

Comment by Riaz Haq on June 30, 2021 at 4:54pm

Pakistan’s electricity demand rises up to 20%
Minister claims growth of circular debt has been reduced by Rs200b this year

https://tribune.com.pk/story/2306561/pakistans-electricity-demand-r...


Federal Minister for Energy Muhammad Hammad Azhar has said up to 20% growth in demand for electricity has been witnessed this year, of which industrial demand has remained above 12-13%.

During a meeting with US Embassy Chargé d’affaires Lesslie Viguerie, Azhar said that the increase in demand was a positive sign not only for the overall economy, but also for the energy sector as it boosted the confidence of investors.

Azhar told the US envoy that due to the prudent policies and effective measures undertaken by the government, the growth of circular debt had been reduced by Rs200 billion this year as compared to the previous year.

The federal minister also spoke about the approximate $800 million investment that Pakistan had made in the expansion and improvement of transmission and distribution system in two and a half years, which led to the record transmission of more than 4,000 megawatts this year.

“Another $117 million has been earmarked for the next financial year for the improvement of transmission and distribution system,” he said. Azhar invited US-based companies to explore possibilities of investment in Pakistan’s energy market. He highlighted that Pakistan and the United States had excellent working relationship in the energy sector, which would get a further boost from the new investor-friendly policies of the present government.

Shedding light on the close partnership between the Power Division and the United States Agency for International Development (USAID), the minister pointed out that yet another milestone in long-term energy planning had been achieved with their assistance in the Indicative Generation Capacity Expansion Plan (IGCEP), which was bound to address the issues related to planning and demand assessment.

Comment by Riaz Haq on July 20, 2021 at 7:48am

#Pakistan & #Russia agree to jointly finance/build 1,100 Km #gas pipeline from #Karachi to #Lahore. It'll cost $2.5-$3 billion & complete by 2023. Pak will own 76%, Russia 24%. Carrying capacity: 700-800 mmfcd, upgradabale to 2,000 mmfcd with compressors. https://www.business-standard.com/article/international/pakistan-ru...


Pakistan and Russia have signed an agreement for the construction of about 1,100-km gas pipeline from Port Qasim in Karachi to Lahore at an estimated cost of USD 2.5-3 billion by the end of 2023, according to a media report on Friday.

The Heads of Terms (HoTs) of shareholders' agreement was signed on Thursday after four days of talks, the Dawn News reported. The two sides also signed minutes of the third meeting of the Russia-Pakistan Joint Technical Committee (JTC) for implementation of the Pakstream Gas Pipeline Project commonly known as North-South Gas project.


The two sides agreed over 74:26 per cent shareholding in the special purpose vehicle (SPV) for the project. This envisages both put option' and call option' to Russian side which means its entities can move out of the project if it is not found feasible or increase its shareholding to 49 per cent if it is able to provide attractive financing arrangements acceptable to Pakistan. In any case, Pakistani entities will maintain majority shareholding.

The Russian side will arrange funding for foreign exchange components through suppliers' credit or typical project financing to cover imported items like steel, consultancies, pipelines and related products and materials not available in Pakistan. The concession agreement for the pipeline will remain effective for 25-30 years. The pipeline size was agreed at 56-inch diameter to cater for next 30-40 years of energy needs in the country that will ensure 700-800 million cubic feet per day (mmfcd) of free gas flow which can go up to 2,000mmcfd with compressors.

The next steps will be the signing shareholders' agreement, financial agreement, gas transportation agreement and lenders agreement during which time the Russian side will complete the front end engineering design (FEED) and the Pakistani side will arrange dollar financing of local currency component against Rs321bn worth of Gas Infrastructure Development Cess.

The two sides committed to expeditiously implement the project to meet the emerging energy security scenario of Pakistan to ensure investment commitments by coming LNG terminals, the Pakistani daily reported.

At the signing ceremony in Islamabad, Pakistani side was led by Petroleum Division Secretary Arshad Mahmood while Deputy Director of Department of Foreign Economic Cooperation and Fuel Markets Development of Russian Ministry of Energy Alexander Tolparov led the visiting team.

Comment by Riaz Haq on August 3, 2021 at 11:29am

#Pakistan's domestic #oil consumption in FY2021 (July 2020-June 2021) totaled 19.45 million tons, up 19% from the 16.36 million tons in the previous year as #economic activity picked up and the country's imports moved to Euro 5. #energy #economy #COVID https://www.spglobal.com/platts/en/market-insights/latest-news/oil/...

Pakistan plans to secure adequate supply of middle distillates to supplement its improving economy but expectations of tight Chinese motor fuel exports for the second half of 2021 may prompt the South Asian nation to raise imports from other main supply sources in the Middle East, according to oil product trading sources and market analysts based in Karachi.

Pakistan's domestic oil consumption in fiscal year 2021 (July 2020-June 2021) totaled 19.45 million mt, an increase of 19% from the 16.36 million mt consumed over the same period the previous year as an improvement in domestic economic activity led to a strong uptick in gasoil and gasoline demand, data by the country's Oil Companies Advisory Council showed.
The uptick in gasoil demand was evidenced by the 18% year-on-year jump in diesel sales over FY 2021 to 7.699 million mt, in contrast with 6.546 million mt consumed in FY 2020, the data showed.

Easing COVID-19 restrictions during the last fiscal year increased industrial activity, boosting overall demand for petroleum products, which helped the economy to grow 3.94% after two years, Shahrukh Saleem, research analyst at Karachi-based ALD Securities, said.

Moreover, diesel sales also increased on the back of a stimulus package in the farming sector, with subsidies given to the sector to aid in the increase in agricultural output, another industry source said.

In addition to gasoil demand, Pakistan also recorded a sharp year-on-year growth in gasoline consumption -- the result of a recovering automobile sector.

According to data from the OCAC, Pakistan's petrol sales recorded an increase of 13% to 8.237 million mt in FY 2020.

"Lower interest rates enticed consumers to borrow funds to buy cars on installments," Tahir Abbas, head of research at Arif Habib Securities, said.

In FY 2021, domestic car sales rose to 181,397 units, from 111,632 units a year earlier, data from Pakistan's Automotive Assemblers Association showed.

Middle distillate supply sources
The improvement in Pakistan's gasoil and gasoline demand helped to absorb barrels from the regional market, with traders saying that this may have a knock-on effect of shoring up prices should this upward trend be sustained.

Pakistan imported around 800,000 mt of gasoline from China in H1 2021, almost double the 437,000 mt received in H2 2020, latest data from China's General Administration of Customs showed.

This is especially so given that regional supply balances are tightening, with several sources noting that deep cuts to oil product export volumes from North Asian producers, in particular China, have resulted in a tight outlook for the rest of 2021.

China's middle distillate exports are expected to fall over the coming months as Beijing looks to limit oil product export permits in an effort to cut emissions to meet the country's carbon zero target, while reserving enough barrels for domestic consumers.

Beijing is likely to allocate about 7.5 million-9.5 million mt of quotas for exporting gasoline, gasoil and jet fuel in the final round of allocation for this year, S&P Global Platts reported earlier. If the allocation hits 9.5 million mt, the total allocation would work out to 39 million mt for 2021, about 14.7% lower from the actual export level of 45.75 million mt in 2020, Platts calculations showed.

Reflecting the tight supply outlook, the physical FOB Singapore 10 ppm sulfur gasoil crack spread against front-month cash Dubai averaged $6.96/b over July, sharply higher than the $5.17/b average in January.

Comment by Riaz Haq on September 1, 2021 at 6:36pm

#Pakistan steps up #oil and #gas imports as #economy recovers. So far this year, the nation has imported at least 785,000 tons of fuel oil through tenders, up 52% from what it imported all of last year. #LNG imports are up 23% to about 5.3 million tonnes
https://economictimes.indiatimes.com/news/international/business/pa...

Pakistan has stepped up its oil NSE -1.37 % and gas imports this year from last year as demand from its power sector increases amid more economic activities as coronavirus-induced restrictions are lifted, industry sources said.

The country is a key importer of liquefied natural gas (LNG) and fuel oil used for power generation. Any significant increase in imports typically push up prices for these fuels.

So far in 2021 through September, the South Asian country has imported at least 785,000 tonnes of fuel oil through tenders, up 52% from what it imported all of last year, according to data from tender documents and traders.

Its overall LNG imports rose by 23% to about 5.3 million tonnes though August this year, compared with the same period last year, Refinitiv Eikon shiptracking data showed.

"Many plants are revving up production as the economic activities are going back to normal, which has been the main driver in the power sector," a Pakistan-based source told Reuters, declining to be named as he was not authorised to speak with media.

"Oil-fired power plants can be started in a short time and are used usually in summer when power generation on LNG is still not enough," the source said, adding that demand for fuel oil could wane from October when power generation demand eases as the weather gets colder.

The country has also added about 250,000 tonnes of storage for oil products this year, mainly for gasoline and gasoil, and revamped some existing tanks, which has also added to fuel demand, the first source said.


"But, high steel prices are putting pressure on construction projects, which could in turn pressure demand for oil," the source added.

Comment by Riaz Haq on September 18, 2021 at 1:29pm

Global #energy prices surging! #Pakistan & #Bangladesh are among developing nations in #Asia that can no longer afford to pay soaring #LNG prices, raising the risk of power rationing or the burning of dirtier alternatives this winter. #gas #inflation https://www.bloomberg.com/news/articles/2021-09-01/developing-asia-...

Bangladesh’s state-run Petrobangla plans to stop buying spot LNG cargoes for the rest of the year after a quadrupling of prices over the past year to a seasonal high. Pakistan has repeatedly canceled and reissued LNG purchase tenders in an effort to get better offer prices, without avail.

The evolution marks a stark turnaround after developing Asia helped drive a surge in trading of the super-chilled fuel and built LNG import strategies on the premise that spot shipments would be abundant and cheap. Unlike richer counterparts in the region that can pass on this year’s historic price rally to end-users, some governments may need to rethink LNG procurement strategies and reduce exposure to the volatile spot market, switch to dirtier fuels such as coal or oil or even curb electricity production.

“With spot prices so high and with relatively low development, these countries may not be able to afford the current sky-high prices for gas on the global market,” said Ron Smith, senior oil and gas analyst at BCS Global Markets. A return of power rationing this winter “seems quite possible” for Bangladesh and Pakistan.

Nations in South Asia have the most potential to take advantage of cheaper fuel oil to offset the rise in spot LNG prices through this winter, said Felix Booth, head of LNG at energy-intelligence company Vortexa.

Comment by Riaz Haq on November 14, 2021 at 6:49pm

#Pakistan's oil products consumption rose 24% on the year to 5.863 million tons over July-September due to a rebound in #industrial and #transportation activity and an increase in demand for fuel oil following a rise in #LNG prices. https://www.spglobal.com/platts/en/market-insights/latest-news/oil/...

Pakistan emerged as the top destination for China's gasoline outflows in September, surpassing the traditional destination of Singapore, data released by the General Administration of Customs showed on Oct. 20.

Total exports to Pakistan rose to 242,000 mt, surging 227.5% from August, and also up 126% on the year.
Thanks to the sharp increase in September, total exports to Pakistan were at 926,000 mt over the first nine months of the year, soaring 765.8% on the year, the sharpest jump among all the top 10 destinations. Exports to Indonesia also increased sharply by about 140.9% year on year to 838,000 mt.

Pakistan's oil products consumption rose 24% on the year to 5.863 million mt over July-September due to a rebound in industrial and transportation activity and an increase in demand for fuel oil following a rise in LNG prices.

The country's oil demand is poised for robust growth as a central bank stimulus package and healthy farm sector growth underpin a broader economic recovery and boost vehicle sales, according to analysts.

"We are eyeing growth of 4%-5% in diesel sales and 12%-15% in petrol sales this year, given the recovery in economic activity," said Atif Zafar, chief economist and director research at Topline Securities, a Karachi-based brokerage house. "The higher liquidity has resulted in an increase in car sales, which in turn will also result in higher petrol sales," Zafar added.

Meanwhile, September outflows to Singapore jumped 495.8% on the month to 209,000 mt, but still down 60.7% on the year.

Despite an year-on-year decline, Singapore still took about 39.5% of China's total gasoline outflows during January-September, compared with 52% during the same period last year.

China's September gasoline exports have recovered from a 30-month low of 568,406 mt in August to 920,000 mt in September, up 61.9% on the month.

The outlook for gasoline demand remains bullish in Asia and the Middle East, as economic activity started to pick up in September, with sources noting movement of cargoes towards end-users in Pakistan.

"The strength in Asian gasoline is apparent in cargoes flowing out of China and various parts of Asia to meet the prompt demand in Southeast Asian countries," said a Singapore-based source.

"We are starting to see slow improvements... spot tenders in Pakistan and cargoes are heading there," another Singapore-based source said in September.

"PSO [Pakistan State Oil] has also issued buy tenders for 92 RON gasoline for October and November this month," the source added.

Gasoil
China also revived its gasoil exports last month with the new quota allocated in early August.

As a result, Australia returned as the second top recipient of China's gasoil in September, with 118,000 mt exported, compared with zero in August.

In September, Australia's appetite for gasoil improved following easing of some pandemic-related restrictions amid progress in the country's vaccination program.

"Australia's demand has been quite supported due to mining demand, especially given how high coal prices are now. But of course, the easing of restrictions will help in the recovery of gasoil demand," said a Singapore-based trader.

Bangladesh also increased its gasoil imports from China in September, with around 113,000 mt arriving last month, up 75.5% from August.

Accordingly, total exports to Bangladesh surged 67.9% on the year over January-September, up 67.9%, the sharpest growth among the top five recipients -- with four in Asia and the fifth being Australia in Oceania.

Comment by Riaz Haq on January 3, 2022 at 8:20pm

Arif Habib Limited
@ArifHabibLtd
During CY21, industry recorded highest ever MoGas sales of 8.6mn tons. Moreover, total industry sales surged by 19% YoY to 20.8mn tons during CY21.

https://twitter.com/ArifHabibLtd/status/1478004863250440193?s=20

Comment by Riaz Haq on January 3, 2022 at 8:37pm

Arif Habib Limited
@ArifHabibLtd
Total (oil) industry sales (in Pakistan) surged by 19% YoY to 20.8mn tons during CY21.

https://twitter.com/ArifHabibLtd/status/1478004887761952770?s=20

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