Pakistan will pay a hefty price for deciding not to go ahead with its first LNG import plan and now opt to strike a deal with neighbours India.
India – in the two-day meeting concluded on Friday – has offered to supply the fuel for between $18 and $20 per Million British Thermal Unit (mmbtu) excluding transportation charges, which is higher than the $18 quoted by Qatar and much higher than the $11 offered by Dutch firm 4Gas in January 2011.
Mashal LNG import project was the most viable option for cheap LNG import back then but it became a victim of controversy and was eventually retendered by the economic decision making body of the government.
The Indian team demanded to link LNG price with furnace oil while another proposal was to link it with Brent crude oil price, an official familiar with the matter said.
“LNG price comes to $18 to $20 per mmbtu if it is linked with the current furnace oil price,” a government official said. The official further said that furnace oil is 20% cheaper than crude oil.
The price does not include transportation charges, which will be carried through a pipeline from Bhatinda to the Wagah border.
India will lay a 60-kilometre pipeline from Bhatinda to Wagha border whereas the Pakistani government would lay 30 kilometre pipeline to inject gas into the system of Sui Northern Gas Pipeline Limited (SNGPL), the meeting was informed.
A senior government official said that Pakistan would import 200 million cubic feet gas per day (mmcfd) initially with the option of increasing supply in the long run.
“India is an importer of LNG and will charge the international rate of LNG,” official said.
“LNG import from India is the most viable option at the moment as there will be no capital cost involved and supply can start within months of the deal,” he said adding that if the government imports LNG through Karachi, the cost of just laying a pipeline from Karachi to Lahore will be $1.4 billion.
However, he did mention that this pipeline could also be used to utilise Iranian gas under Iran-Pakistan (IP) gas pipeline project.
“India inked a deal with Qatar to import LNG in 2004 while Pakistan tried but failed to import the fuel from Qatar in 1991,” official said.
The current government tried to jumpstart the Qatar LNG project but it failed to impress the fuel-rich country which in return asked Pakistan to strike a deal with US-based firm Conocophilips that operates its northern fields.
Published in The Express Tribune, September 1st, 2012.