DISCUSSION HELD ON SEPTEMBER 14, 2015

1. Total Requirement of Gas in Pakistan

The present gas requirement of Pakistan is 6 Bcfd (Billion cubic feet

per day).

50% of the countrys total energy needs are met through natural
gas.

Natural gas supplies during 2011-12 remains at 3800 MMCFD.

The current production, 2014-15 is 4.0 Bcfd. The shortfall
remains at 2.0 Bcfd.

The largest use of natural gas is in power sector followed by,

fertilizer, cement, industrial, transport, commercial and
domestic.

2. Available gas and shortfall

 The Pakistans total recoverable gas reserves at estimated at 27 TCF
(Trillion cubic feet). At present rate of production, the reserves will last
for 18 years.

3. LNG Carriers coming to Pakistan arranged by PSO

LNG import is constrained by the storage capacity of 150,900 m 3

(cubic meters), including 5% heel, available in the FSRU by M/s. Engro
Elengy Terminal Pvt. Ltd. (EETPL). The LNG carriers, therefore, have to
be 150,000 m3 (delivery upto 142,000 m3 LNG per shipment) in size,
as a larger carrier will spend more time on port subjecting it to
demurrage charges.

Presently, PSO has been nominated by Ministry of Petroleum & Natural

Resources (MP&NR) to import LNG on behalf of SNGPL and SSGCL.
There is no firm long-term agreement between PSO and Qatar
Gas/any other LNG Seller. PSO is carrying out spot purchases of the
LNG carriers available in the market (presumably @ USD 14-
16/MMBtu).

4. FSRU availability and cost

The existing FSRU has a spare capacity for 400 MMCFD in year 1 (i.e.
upto March 2016) and 200 MMCFD in years 2 till 15. The cost for
re-gasification will depend on what M/s. EETPL offers to the third party,
who is interested in bringing in their own LNG. The base-line for the
price may be taken as USD 0.06/MMBtu.

5. TPA rules salient features and other statutory requirements

LNG Policy 2011

Under the LNG policy 2011, a business concern may take up LNG
business under:

a. Integrated LNG Project - LNG Developer responsible for importing LNG,

setting up an LNG (receiving, storage and re-gasification terminal) and
carrying out Gas Sales and Purchase Agreement with GoP designated
buyer, gas utility
b. Unbundled LNG Project - an interested party may become either:
 LNG Buyer - GoP designated entity/gas utility/any other party
responsible for import of LNG, carries out an agreement with
LNG seller

LNG Terminal Owner/Operator - responsible for setting up an

LNG receiving, storage and re-gasification terminal and carries
out a tolling agreement with LNG Buyer.

LNG Developer/LNG Buyer/LNG terminal Owner/operator responsible

for implementing the applicable provisions of OGRA ordinance 2002.

LNG supplies to be through international competitive bidding under

PPRA rules by LNG Developer/Buyer.

Third Party Access Rules

These rules provide framework for carrying out gas transportation

agreements/access agreements (GTA/AA) between gas transporters
(business entity owning gas transmission network) and Shippers
(business entity which purchases its own gas and wishing to utilize
transporters facilities for its transmission).

The pipeline capacity can be booked by Shipper(s) on either firm basis

(GTA/AA term of 1 year or more) or interruptible basis (GTA/AA term
of 1 day to less than a year.

The shipper and transporter agree on Maximum Daily Quantity under

firm/interruptible basis.

6. FSRU provided by M/s. Engro Elengy Terminal (Pvt.) Limited

(EETPL)

M/s. EETPL has acquired FSRU named Exquisite from M/s. Excelerate
Energy on time-charter basis for a period of 15 years. The storage
capacity of FSRU is 150,900 m3 out of which only 143,335 m3 can be
re-gasified, the remaining amount being heel, which is kept in the LNG
storage tanks to maintain cryogenic temperature.

The designed gas send-out (LNG re-gasification rate) is 690 MMCFD.

7. Transmission capacity

The total existing transmission capacity is 3950 MMCFD comprising

2310 MMCFD of SNGPL's transmission network and 1640 MMCFD of
SSGC's transmission network.

8. Natural gas and LNG Measuring Units

In the US Customary System (USCS), Natural Gas is measured in

standard cubic feet (scf, sft3), i.e. volume occupied by a cubic foot of
gas at 14.696 psi and 60 oF. No matter what denomination
(thousand(M), million(MM), billion(B) or trillion(T)) is used, a cubic
foot is assumed to be a standard cubic foot.

Whereas in SI, Natural gas is measured in standard cubic meters

(scm, sm3), i.e. volume occupied by a cubic meter of gas at 101.35
kilopascals and 21 oC.

1 m3 = 35.31 ft3

LNG is measured in cubic meters (m3). Since the volume of natural gas
reduces by 600 times, when it changes phase from gas to liquid.

1 m3 LNG = 600 m3 = 21,186 ft3 of Natural Gas

The flow rate of gas pipelines and gas send-out rate of FSRU is
measured in MMCFD (million cubic feet per day). 1 MMCFD is equal to
11.57 ft3/sec.
 Natural gas and LNG

To convert: B m3 B ft3 MM MM T MM
TOE tons Btu BOE
LNG

From ------------------- Multiply by --------------------

1 billion cubic metres 1 35.3 0.90 0.74 35.7 6.60

NG

1 billion cubic feet NG 0.028 1 0.025 0.021 1.01 0.19

1 million tonnes oil 1.11 39.2 1 0.82 39.7 7.33

equivalent(TOE)

1 trillion British thermal 0.028 0.99 0.025 0.021 1 0.18

units

1 million barrels oil 0.15 5.35 0.14 0.11 5.41 1

equivalent (BOE)

9. Cost of FSRU

The cost of FSRU ranges between USD 330 - 500 million depending on
the LNG storage capacity and gas send-out (i.e. Re-gasified LNG
produced).

10. Suggested Supply Chain Model

The suggested business model will be of an LNG developer having its

dedicated gas transmission pipeline for RLNG transport and firm
commitments with RLNG buyers/end-users.

Starting from now, LNG developer can establish first FSRU based LNG
terminal in a time frame of 8 - 12 months (May 2016 - September
2016 can go upto December 2016) to add 400 MMCFD supply in the
42" dia. X 358 km pipeline by SSGC.

In the interim period i.e. from today till December 2016, LNG Buyer
may contract with EETPL for utilizing additional terminal capacity
available in FSRU. This will materialize upto December 2015, after
which SSGC will be able to transport 240 MMCFD gas to SNGPL and
has a demand for 240 MMCFD for its own consumption.
11. Envisioned transmission capacity

The existing capacity of SSGC's transmission system can be enhanced

by 240 MMCFD, when the spur line projects: 24" dia. X 33 km Tando
Adam - Massu pipe line and 42" dia. X 14 km pipeline Nara - Sawan
alongwith installation of compressors (120 MMCF each) at Nawabshah
is materialized (expected completion Jan 2016).

Another 800 MMCFD will be enhanced after completion of 42" dia. X

358 km pipeline from Karachi (SMS Pakland) to Nara alongwith
installation of 6 Compressor Units at Nawabshah (expected completion
Jan/Feb 2017).

The GoP/MP&NR are also pursuing other pipeline projects 42" Dia X
1,100 km pipeline from Karachi to Lahore to be laid by Russia
(expected completion by February 2017). Another pipeline project will
be executed by China for transport of 690 MMCFD RLNG from GWadar
to Nawabshah (expected completion by February 2017).

12. Time frame of third party induction in LNG Supply Chain

It will take 6-8 months, considering that a Business Concern (based on

existing terminal tolling model between SSGC and EETPL) is interested
in bringing in FSRU (charter agreement confirmed and FSRU is readily
available) and committed LNG supply under import contract is
available.

Clearances required:

OGRA License for setting-up LNG terminal

i. Existing and projected population and demographic

characteristics of the location;
ii. Existing and proposed land use near the location;
iii. Physical aspects of the location; -
iv. Medical, law enforcement and fire protection capabilities near the
location that can cope with a risk caused by the facility;
v. Exclusion zone distances from the terminal to property and
population as per international standards are complied with;
 vi. Proximity to existing gas infrastructure and market;
vii. Need to encourage remote sitting;
viii. Any other significant community concerns; and
ix. Environmental considerations

Port Authorities subject to studies by Marine Engineering Consultants

Environmental Protection Agency
Explosives Department

13. Possibility of having integral storage other than FSRU

The capital cost of floating storage unit is USD 1,000/tons per annum.
For fulfilling the 2 BCFD shortfall, 20 -30 MMPTA floating storage unit
will be required. This will cost around USD 20 - 30 million and $
0.18/MMBtu (upto USD 138 - 276 million) as operating cost.

14. Business options available as Third party contract within

Existing LSA or investor in independent supply chain

a. LNG Buyer with its own LNG FSO(floating storage unit) and contract
with M/s. EETPL for excess capacity of 200 MMCFD (constrained by
SSGC transmission capability if gas is to be transported to SNGPL
network)
b. LNG developer (constrained by SSGC transmission capability if gas is
to be transported to SNGPL network)

15. Alternatives other than LNG

The other alternatives to import of LNG are:

a. Iran-Pakistan gas pipeline project aimed at bringing 750 MMCFD

to 1.2 BCFD gas to Pakistan.

b. Turkemanistan-Afghanistan-Pakistan gas pipeline project aimed

at bringing 1.325 BCFD gas to Pakistan.

Both of the above alternatives are subject to geo-political situation and

require at least 18-24 months from start of pipeline construction to
first gas delivery.

c. The exploration and production of gas from SHale gas deposits

available in Pakistan
 d. Substitute Natural Gas i.e. utilization of Thar Coal through
underground coal gasification to make water gas and on-surface
conversion of water gas into Methane (other hydracarbons)
through Fischer-Tropsch Process

16. Qmax Carriers required for bridging the demand gap of 2 Bcfd

Under the existing set-up, there are two constraints: FSRU send-out
capacity and transmission capacity. For 2 Bcfd gas demand, 2 similar
size FSRUs (gas send-out capacity of 690 MMCFD) in addition to the
existing FSRU will be required. The total gas send-out (at 95% of
designed send-out rate) for three FSRUs will be 1,966 MMCFD. This
will require LNG volume of 430,005 m 3, i.e. a Qmax ship after every two
days.

17. Grey areas in the existing system

The existing LSA (LNG Services agreement) between SSGC and Engro
Elengy Terminal Pvt. Ltd. is for a term of 15 years. The salient features
of the agreement are as under:

a. Committed RLNG supply to SSGC is 200 MMCFD (capped by annual

LNG import of 1.5 million tons per annum) in year 1 and 400 MMCFD
in years 2 till 15 (capped by annual LNG import of 3 million tons per
annum). The start date of LSA is 29 March 2015.
b. SSGC pays:
i. Fixed capacity charges @ USD 0.6/MMBtu, which amounts
to USD 272,000 per day in year 1 and USD 228,000 per
day in years 2 till 15, which are capped by 95% annual
availability factor (i.e. FSRU to be available for 347 days in
a year).
ii. Variable utilization charges @ USD 0.06/MMBtu
iii. Flexibility fee @ 25% of Utilization charges, when its gas
send-out rate exceeds 300 MMCFD in year 1 and 500
MMCFD in years 2 till 15.
c. The total investment of M/s. EETPL on the project was USD 150 million
(payback period of 1.6 years based on capacity charges alone).
d. This adds up USD 0.66 on the price of imported LNG.

18. Indigenous gas - Sindh production and Sindh requirement

 CONTRIBUTION
Sr. TO SSGCS
SUPPLY SOURCES PURCHASES
# OVERALL
SUPPLY
MMCFD %
1 Zarghun (Mari-MCL) 25 1.825
2 Sui (PPL) 70 5.109
3 Jhal Magsi (OGDC) 15 1.095
4 Mazarani (PPL) 7 0.511
5 Haseeb (Hycabex) 10 0.730
6 Mehar (Petronas) 30 2.190
7 Zamzama (BHP) 154 11.241
8 Bhit (ENI) 334 24.380
9 Rehman (Polish Gas) 9 0.657
10 Sari (OGDC) 3 0.219
11 Sinjhoro (OGDC) 12 0.876
12 Kunnar/Dar (OGDC) 176 12.847
13 Sujawal (Mari) 11 0.803
14 Nur/ Bagla (OGDC) 9 0.657
15 Badin (BP) 107 7.810
16 Kunar (OGDC) 124 9.051
Niamat Basal/ Kausar
17 (OPI) 34 2.482
18 Bobi (OGDC) 12 0.876
19 Adam-X1 Pakho (PPL) 2 0.146
20 Jakhro (OGDC) 6 0.438
21 Kadanwari (ENI) 93 6.788
22 Latif (OMV) 54 3.942
23 Miano (OMV) 48 3.504
24 Sawan (OMV) 25 1.825
TOTAL 1370.00 100.000

The gas demand of SSGC is 1400 MMCFD, which is managed by

curtailment of gas to CNG and industries.