With Qatar adamant on charging a high price of $18 per unit for liquefied natural gas (LNG), Pakistan has decided to explore the option of cheaper LNG import from energy-rich Algeria.
A senior official of the Ministry of Petroleum and Natural Resources told The Express Tribune that LNG import would come up for discussion in the second session of Pakistan-Algeria Joint Ministerial Commission (JMC) scheduled to be held from April 14 to 19 in Algeria.
The petroleum ministry will lead the Pakistani side while joint secretaries of Economic Affairs Division (EAD) and Foreign Office will also attend the meeting. Petroleum Minister Asim Hussain will join later on either April 16 or 17.
Quoting agenda of the meeting, the official said main focus would be on mutual cooperation in the oil and gas sector. “Pakistan is vigorously pursuing LNG import to overcome energy crisis and the Algerian side will be asked to export LNG and set up a terminal in Pakistan,” he said.
The petroleum ministry is exploring different options for LNG import to achieve a competitive price. Last month, a Pakistani team visited Qatar, but Doha refused to offer gas at less than $18 per million British thermal units (mmbtu).
“The ministry also tabled a summary on an integrated LNG import project in a meeting of the Economic Coordination Committee (ECC) on Thursday, but the matter was deferred to next meeting,” the official said, adding this was also one of the options to buy gas at a competitive price.
Earlier, the government had allocated pipeline capacity to private LNG importers for supply of 1.4 billion cubic feet per day of gas, but they also quoted the price of $18 per mmbtu.
Pakistan and Qatar have already signed a memorandum of understanding for the import of LNG on government-to-government basis. According to the agreement, Pakistan will import 500 million cubic feet per day (mmcfd) of gas, which will be utilised to generate 2,500 megawatts of electricity.
The government will also inject LNG into the pipeline network of Sui Northern Gas Pipelines and Sui Southern Gas Company and charge a weighted average price of gas. This may lead to a hefty increase in domestic gas prices to $9 per mmbtu compared to existing $4.5 per mmbtu, which will affect all categories of consumers.
“Many power producers are using furnace oil, which costs a price equal to $20 per mmbtu and LNG import at $18 per unit is still affordable for the companies using furnace oil,” the official insisted.
Other matters for JMC
“Pakistan and Algeria are also expected to sign a bilateral trade agreement to enhance the volume of trade,” the petroleum ministry official said.
In 2010-11, Pakistan’s exports to Algeria stood at $32.033 million against imports of $2.525 million.
They will also consider enhancing cooperation in the fields of technology, textile and mining. “There is also a proposal to sign a news exchange agreement between state news agencies of the two countries,” the official said.
According to sources, defence cooperation will also be discussed and a draft of agreement in this regard has been submitted to the Algerian government.
There are expectations that the two sides will make some headway in defence matters.
Published in The Express Tribune, April 14th, 2012.