In 2021 the idea of SSGC Alternative Energy (AE) was conceived to allow SSGC to look at additional avenues to generate Income which are outside the Core business. Initially several areas were highlighted with the following objectives.
- Flexibility of engaging in business on B2B and B2C commercial terms, which are not possible for SSGC under the current regulatory regime.
- Support SSGC through Non-Operating income helping it get out of losses and supporting its largest shareholder the Government of Pakistan.
- A lean and agile organizational structure that will help it in nimble decision making in response to changing market dynamics.
- Enter green/alternative energy markets which have been outside SSGC’s core business.
- Work has been done in the following areas:
- UNALLOCATED / UTILIZED GAS FIELDS:
- Unallocated / unutilized gas can be quickly brought to market owing to the availability of such fields and fully developed natural gas transmission and distribution networks in the country. Replacement for indigenous gas is imported RLNG, which is getting expensive by the day whereas, under current scenarios availability of RLNG is also a challenge.
- SSGC-AE has developed complete supply chain to purchase unutilized gas volumes from locally operating national and multi-national E&P firms at a negotiated price and to sell to its customers under ‘OGRA Gas (3RD Party Access), Rules, 2018 and Pakistan Gas Network Code.
- Thorough assessment and review from legal and regulatory perspective has been carried out to ensure that the entire value chain conforms to the prevailing laws, rules and regulations.
- Against initial 2 rounds of tendering for procurement of gas, SSGC-AE has received offers for supply of over 200 MMscfd unallocated / unutilized gas indicating substantial market potential.
- Contract for the supply of ~10 MMscfd gas has been finalized whereas the contract for another 50 MMscfd supply is at final stages of negotiations.
- License for sale and marketing of natural gas has been obtained from OGRA.
- Upon request, a detailed framework for the governance of this sector has been prepared and submitted for the approval and implementation by Ministry of Energy.
- Local industry and national economy will benefit hugely with the availability of quality fuel at comparatively lower rates. The initiative has the potential to replace LNG imports of USD 220 – 4,901 million per annum.
2.BIO-GAS / BIO METHANE ON BOO METHOD:
- With a substantial potential of Biogas production in the country (+200 MMSCFD), Pakistan can reduce RLNG imports via utilizing untapped renewable energy sources like Animal dungs, Municipal Solid Waste, Energy crops, slaughterhouse waste etc.
- Piped Natural Gas (PNG) supply demand gap is widening and there is firm demand for biomethane/biogas in the market. SSGC-AE has mobilized the Biogas Industry in Pakistan as the First Mover by positioning itself as committed buyer from Industrial Scale Biogas Plants.
- Even at the starting potential of 10 MMSCFD, commercial-scale bio-gas has the potential to replace LNG imports of USD 40 – 48 million per annum.
- To promote the initiative, SSGC-AE has hired consultancy services for the development of National Biogas Policy and other regulatory and legal framework. Market Study and Tariff Model has been developed. Project capex for 1 MMSCFD Bio-Gas plant is estimated at USD 6-8 million. Tender was published in Feb, 2023 on BOO basis.
- The tender response was very encouraging with 05 sets of tenders purchased by interested parties. The tender has been postponed till stabilization of exchange rates and commodity prices which were experiencing sharp fluctuations.
- Investors in sector seek policy framework to govern activities in the sector. Draft Policy for Bio-Gas / Bio-Methane has been developed and submitted for the consideration and formalization by Ministry of Energy.
3.NITROGEN PRODUCTION AND THE EFFICIENT USE OF NATURAL GAS:
- Declining production of natural gas obligates dependence on import channels, which is hindered by steep increase in LNG price. The scenario calls for prudent utilization of available gas volumes.
- Purely domestic consumption sectors are being served by Gas of calorific value substantially higher than the required. Whereas, Nitrogen gas can be produced locally at rates lower than the natural gas and can be injected into the target distribution network in a controlled fashion thereby adjusting the GCV and saving valuable natural gas volumes.
- SSGC-AE will develop nitrogen-injection units to capitalize upon opportunities for efficient utilization of available energy. Potential exists to spare 8-10 MMSCFD gas from the low efficiency sectors for utilization by beneficial sectors. Gas saved through nitrogen injection gas can be quickly brought to customers with ready demand capitalizing on the fully developed natural gas transmission and distribution networks and Third-Party Access Rules in the country. Through this initiative, the country can save up on LNG imports worth by USD 35-40 million per annum.
- Detailed techno-commercial models have been developed indicating the viability of the project with NPV, IRR and Payback Period of USD 14 million, 36% and 4.4 years respectively against a project capex of USD 18 million.
- Multiple implementation strategies have been developed for consideration and approval by BOD.
4.COAL GASIFICATION:
- Thar holds world’s 7th largest coal reserves at 175 billion Tons which is sufficient to generate 100,000 MW of electricity for over 200 years.
- On the other hand, indigenous gas reserves is projected to reduce to the half of current production by fiscal year 2026-27. A cheaper and viable alternative to the natural gas appears in shape of synthetic gas produced from the gasification of Thar Coal.
- SSGC-AE has been encouraging local and foreign firms to establish coal to gas plants through the execution of multiple MoUs. SSGC-AE will purchase synthetic natural gas (SNG) from the C2G producers and provide the same to customers under TPA Rules.
- For coal gasification plant producing 100 MMSCFD of SNG, USD 2 billion is required as capex. Whereas, the reserve size can easily support a plant producing 1,200 MMSCFD of SNG. Initial engineering studies indicate that SNG can be produced at a target price of USD 8-10 per MMBTU.
- SSGC-AE’s efforts have sparked significant interest and mobility in the sector including the prospective producers, buyers and transporters of the Synthetic Gas produced by gasification of indigenous coal through state-of-the-art technologies. However, Investments in the sector are impeded by lack of policy framework to govern the activities in the sector.
- Accordingly, Ministry of Energy has been pursued to develop policy/ framework for coal gasification in expedited fashion to provide comfort and coverage for the prospective investors. A proposed draft policy has already been submitted while experts from SSGC-AE continue to support the development of ‘first draft for national bio-gas policy’ as ‘members’ of the committees constituted by DG Minerals Office (Ministry of Energy).
- SSGC-AE will benefit from the sale and purchase of synthetic gas being the first mover in this sector which has the potential of replacing all-natural gas in the country.
5. POWER GENERATION THROUGH HARNESSING WASTE HEAT AND ENERGY:
- Substantial amount of energy is dissipated and wasted when gas enters the distribution network from the transmission pipelines after passing through pressure regulation (SMSs).
- SSGC AE aims to harness the energy that is being dissipated thereby generating useful electrical energy. Detailed Techno-commercial studies have been completed while the next step is Front End Engineering Design.
- SSGC-AE would invest in designing and installation of power generation units to produce electrical power through turbo-expanders. Moreover, SSGC-AE aims to install “Heat Recovery Steam Generation (HRSG)” Plant leading to Power Generation through Steam Turbine (ST) along with the associated ancillaries / auxiliaries at HQ-2 Daur, Nawabshah.
- Technical review of the projects is in progress, initial estimates for power generation stand at 4 MWe and 15 MWe from the prospective pressure let down and heat recovery units respectively. Capex estimates stand at USD 4 and 10 million
6.WASTE WATER TREATMENT AND TRANSPORTATION OF WATER TO INDUSTRIAL CUSTOMERS:
- SSGC-AE has recently entered into a Memorandum of Understanding with the Asian Development Bank (ADB) and a number of relevant market players to enter into the consortium for the development of a full-scale water treatment and supply infrastructure supplying treated industrial waste water for use by industrial consumers.
- SSGC-AE will bring the heritage and expertise of development and operation of pipeline distribution networks and the billing and recovery enterprise management.
- Investment of USD 60-80 million is expected to support a 600,000 GPD infrastructure.