Fuel import: Qatar quotes hefty price for its LNG

Country’s demand puts off potential local buyers, including power producers.

ISLAMABAD:

Qatar has demanded $18 per Million British Thermal Unit (mmbtu) for LNG import to Pakistan, a price that seems to be much higher than expectations as potential buyers have said they will not purchase the fuel at the current price, according to an official.

Pakistan signed a memorandum of understanding with Qatar in February for import of 500 mmcfd of LNG to generate 2,500 megawatts (MW) electricity.

“We have received a term-sheet from Qatar that is seeking over $15 per mmbtu price for LNG,” Petroleum Secretary Ijaz Chaudhry said adding that the two countries are yet to finalise the price.

Private sector parties – earlier responsible for LNG import – had quoted the exact same price of $18 per mmbtu price for LNG import and this had been received with a lot of criticism from different quarters. Even the Oil and Gas Regulatory Authority (Ogra) had opposed this exorbitant price and recommended that the case be tabled before the Economic Coordination Committee (ECC) of the Cabinet for approval.

Power producers will not purchase LNG imported from Qatar if the deal is inked at the proposed rate as the quoted price of $18 has already been rejected when the private sector came up with the proposal, according to a petroleum ministry official.

The cost of Iran-Pakistan (IP) gas will be $11 per mmbtu whereas the cost of Turkeministan-Afghanistan-Pakistan-Iran (TAPI) gas pipeline project would come to around at $13 per mmbtu.

However, the price is a couple of dollars less than furnace oil and makes it a viable option only for those industrial units which are operating on the expensive furnace oil.

Earlier, the private sector LNG developers had the mandate to find individual buyers of imported LNG, however, the petroleum ministry succumbed to the influential LNG lobby and agreed to purchase 200 mmcfd of LNG from the private sector and inject it into the system of gas distributors Sui Northern Gas Pipelines and Sui Southern Gas Company, a move that would average out the high cost of imported LNG, but in the process will result in an increase in local gas prices.

The injection of LNG into the system will take the weighted average price of local gas to the range of $9 per mmbtu from the existing $4.5 per mmbtu, an official of the petroleum ministry said.

In a setback for household consumers, the government was planning to insert the imported LNG into system of gas utilities and charge weighted average cost of gas from the industry, fertiliser and power sector that are using furnace oil, but now all categories of consumers would have to bear the brunt of the hike in gas prices due to imported LNG, official further said.

Published in The Express Tribune, March 8^th, 2012.