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Construction on ‘Strategic Underground Gas Storages’ to start in August - Inside Financial Markets

Construction on ‘Strategic Underground Gas Storages’ to start in August

– Associated Press of Pakistan

The government has planned to construct the Strategic Underground Gas Storages (SUGS) in August this year to meet the increasing gas demand in future, which were considered mandatory along with the import of LNG as per international practices.

“Feasibility study of the SUGS is scheduled to be completed in May, while construction on these facilities will start in August 2021,” a senior official privy to petroleum sector developments told APP.

He said it was unfortunate that the previous government had introduced the Liquefied Natural Gas (LNG) in Pakistan’s market without constructing any storage facility and declaring it a petroleum product, due to which it cost almost double than the locally produced gas.

In the given scenario, the official said every LNG shipment had to be consumed within four to five days, in the absence of storage facilities, for berthing of another cargo ship.

“Whenever LNG terminals are installed in any part of the world where Pakistan-like gas infrastructure exists, the storage facilities must be constructed there,” he added.

The official said the construction of SUGS was part of the government’s policy to improve energy security and affordability in the country, adding “the SUGS is aimed at meeting the country’s growing domestic and commercial needs especially during peak winter months of November, December, January and February.”

The underground facilities, he said, would be constructed in collaboration with the Asian Development Bank (ADB). A consortium of European oil and gas equipment companies is leading the study in that regard.

Explaining the rationale for building the SUGS, he said Pakistan had considered building emergency stockpiles of gas “to deal with supply disruption amid the country’s growing domestic and commercial demand especially in winter.”

Recently, he said, all stakeholders held a meeting and agreed to expeditiously complete the study report on the methodology of underground gas storage till May 2021, so that availability of funds for facilities could be ensured in due course of time. “Final report will provide a blueprint for the facilities concerning size, modulation and ensuring uninterrupted supply of gas.”

In 2019, the official said, Minister for Energy Omar Ayub Khan and Special Assistant to Prime Minister on Petroleum Nadeem Babar had discussed the SUGS with the ADB, who agreed to undertake a feasibility study for the project and allocated a grant.

Inter-State Gas Systems (Pvt) Ltd., a state-owned entity of Pakistan, would be the focal agency for the project.

Recently, the ADB has completed its competitive bidding process and appointed an international consultant for preparing a feasibility study. Project infrastructure could be funded through Gas Infrastructure Development Cess (GIDC).

The SUGS facilities are crucial for the country because of the committed supplies of imported gas under the international gas agreements and fast-growing gas demand in the country to keep pace with economic progress.

“The project will also help significantly enhance Pakistan’s capability to provide uninterrupted gas supply for sustainable economic growth,” the official remarked.

Syed Zaki Hussain

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Inside Financial Markets was a joint publication of Pakistan Stock Exchange (PSX)and Society of Technical Analysts Pakistan (STAP)