Fighting for contract: India quotes higher price than Qatar for LNG

Published: September 1, 2012

$18 per mmbtu is the price offered by Qatar a couple of months ago. ILLUSTRATION: JAMAL KHURSHID

ISLAMABAD: 

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.

Reader Comments (15)

  • Raw is War
    Sep 1, 2012 - 7:22AM

    why crib? Price of gas goes up every day. Ask your friends- the Saudis.

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  • Imran Hyder
    Sep 1, 2012 - 7:56AM

    This is brilliant opportunity for Paksitan to cope with current energy crises. Every major industry is badly effected by this surge in national gas header. Only 30 km from border is most feasible, supply=demand will be amicably meet to some level. Our policy makers especially petroleum and gas ministry should immedialtly go for it. Fertilizers, textile , automobile and power sector have been badly affected by recent energy crises and thousands of skilled workers are at stake.Power generation would als be improved by this short term solution. Moreover it is also in national interest but ultimatly we have to go for longer term solution which is Iran gas pipe line project (21 Million per meter per day gas).

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  • sana
    Sep 1, 2012 - 9:11AM

    “the cost of just laying a pipeline from Karachi to Lahore will be $1.4 billion” not true, a gas pipeline already runs from karachi to lahore. Generally a bad idea to import gas from a country that is gas deficient.

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  • BlackJack
    Sep 1, 2012 - 10:23AM

    India is a LNG importer and will always demand higher prices than states with their own reserves. However, given the dire situation and lack of funds, it makes sense to accept the Indian proposal that requires hardly any set-up costs. The same pipeline could link up into the TAPI option once if it fructifies.

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  • dark lord
    Sep 1, 2012 - 11:00AM

    I think for the first time in a really long time, I am seeing comments from Pakistan that make sense.

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  • sgrr
    Sep 1, 2012 - 11:48AM

    This is the result of media hype created by our responsible media when we were in nogotation with shell gas in 2011 @ of $11. Then at that time time it was a loss of exchequer to the tune of billions. Now where are these media lions now?

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  • sgrr
    Sep 1, 2012 - 11:50AM

    Now we are going to strike deal with a middleman which certainly will take its own profit. Great work by media and supreme court of Pakistan. “Stitch a time saves nine”

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  • Ahsan Majeed
    Sep 1, 2012 - 1:08PM

    We don’t need to lay a pipeline between Karachi and Lahore, we can simply use the imported LNG in Karachi and local gas upcountry using existing infrastructure. Average price can be calculated and charged uniformly across Pakistan.

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  • Khalq e Khuda
    Sep 1, 2012 - 3:08PM

    Excuse me writer! Please mention that it was the Supreme Court which scrapped the earlier deal while the government kept on saying rather helplessly and evidently to no avail that this is the best shot we have.

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  • It Is (still) Economy Stupid
    Sep 1, 2012 - 4:28PM

    @sgrr:
    Get your head from the sand and read the comment from raw is war. Price in 2011 was $11 plus transportation cost. In 2012 price is $18 no transportation cost.

    ET is poor in research skills otherwise they would have compared the current price of gas from 4gas company and cost of transportation to compare that with the Indian offer. In order to compare apple to apple. Alternatively they would have shifted through the proposal of Indian offer in most likelihood they know about the 2011 offer and showed value in their offer. The confusion is because ET is reporting oranges to apple to sensationalize the news item or they are poor in math,

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  • Bala
    Sep 1, 2012 - 7:56PM

    Honest advice to Pakistanis from an Indian : Take the Offer!, kick start the economy, hopefully you will earn some money, use that money wisely to build your own pipelines in future.

    Am I asking too much of Pakistan? Well, the easy way out is to give the LNG sector to Deeper-Than-Teacup, Higher-Than-Hiccup friend of yours without any bidding (as you do in other sectors) and dream about virgins in heaven. .

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  • Sep 1, 2012 - 8:27PM

    How can furnace oil be cheaper than crude oil? It makes no sense. It is only when you process (value addition) crude oil that you get furnace oil. The cost of processing and the refinery profit margin must mean that furnace oil is more expensive than crude oil. Otherwise why would anyone bother to process crude oil at all!

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  • G. Din
    Sep 1, 2012 - 11:43PM

    I don’t understand the mindset of Pakistani. On the one hand, everyone is up in arms against India accusing it of pilferage of “Pakistan-owned” water in “Pakistan-owned rivers” under the IWT. If India is supposed to be shutting off and releasing water at will just to harm Pakistan, how are Pakistanis sure that India will not do the same with regards to gas supply? After all, it is far easier to turn the spigot to shut off gas.Recommend

  • sgrr
    Sep 2, 2012 - 9:24AM

    Could you please mention the transportation price per mmbtu?

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  • shami
    Sep 3, 2012 - 10:23AM

    The long term supply from dutch company at Brent of 113 is 17.94 and not USD 11 and Qatar price is USD 17.46
    Did any one think that India can provide cheaper LNG? Another pipe dream
    We are going in circles and not solving the problem Recommend

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