The previous govt had signed an MoU with Qatar for the project, but it never materialised. The new govt, however, wishes to pick up right where it was left off. PHOTO: FILE
The new government, in its drive to end energy shortages as quickly as possible, has decided to accord top priority to liquefied natural gas import from Qatar in a government-to-government arrangement and has given the go-ahead to resuming stalled negotiations with Doha.
The decision was taken in a meeting of the Economic Coordination Committee (ECC) of the cabinet on Tuesday, where the participants agreed that preference should be given to import of 500 million cubic feet per day (mmcfd) of LNG from Qatar.
According to the LNG import plan proposed by the Ministry of Petroleum and Natural Resources, two or more import projects of 500 mmcfd each may be undertaken jointly by Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipelines Limited (SNGPL) keeping in view all LNG rules including PPRA rules.
Under the proposed project structure, the ECC said in line with the cabinet approval, preference should be given to Qatar Gas for negotiations between the two governments for purchase of up to 500 mmcfd of LNG.
Some other options could also be explored to encourage LNG suppliers to construct a storage and re-gasification terminal for taking delivery of LNG. In this regard, a public-private partnership model may be worked out, the ECC said.
The ECC asked the petroleum ministry to prepare a separate summary on whether government-to-government negotiations could be started with other countries for LNG import and also whether bids for import through private parties could be invited simultaneously.
In its June 27 meeting, the ECC had cancelled bids invited in two tenders for import of 400 mmcfd of LNG each by the previous government and asked the petroleum ministry to pursue the plan for import of 500 mmcfd from Qatar in a government-to-government deal keeping in view the energy crisis in the country.
It also suggested that a transparent process for rebid should get under way in line with applicable rules for other integrated LNG import projects.
However, the ECC noted lack of consultation with the stakeholders and called for starting negotiations with them for going ahead with the integrated import projects of 500 mmcfd each to ensure transparency.
The previous Pakistan Peoples Party-led government had signed a memorandum of understanding with Qatar for LNG import, but the plan got stuck because of a price row.
Just before the PPP’s five-year tenure was going to end, Qatar came up with a revised proposal and put the price at $17.437 per million British thermal units (mmbtu), a 0.5% discount over the previous price of $18.002, which would lead to savings of $1 billion over the 20-year life of the project.
The price did not include capital cost of LNG terminal and its charges, import expenses, re-gasification, wastage and shipping costs. These additional charges would add about $2.084 to the quoted price.
If all charges are included, then Qatar LNG will cost $19.521 per mmbtu and Pakistan will have to spend $200 million to lay infrastructure for handling imports, resulting in higher prices for the product.
The price is even higher than that offered by private suppliers in two integrated LNG import projects of 400 mmcfd each.
In one of the projects, Pakistan Gas Port quoted a price of $17.7074 per mmbtu and Global Energy International quoted $18.16 per mmbtu. Engro’s wholly-owned subsidiary Elengy Terminal Pakistan submitted a formula instead of a base price. The prices included the cost of setting up the LNG terminal.
Published in The Express Tribune, July 3rd, 2013.
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Can you afford to pay for this ? As no doubt the bills will be raised for goods supplied by Qataris in normal business fashion ! This is not going to be another merry go round as have all recent efforts to find source for cheap fuel !
Well both of the Projects are needed to proceed the only issue is Pakistan needs to the negotiate with all the parties around on good price as the gas price we paying to our companies for exploring reserves are in range of 3 - 9 $ / MMBTU so why paying 11 $ / MMBTU to IRAN and 17-19 $ / MMBTU to QATAR and Private companies, well i also want to add one more thing that LNG is never sold in MMSCFD but is sold in m³ or tons. At this cost Pakistan can not produce the power at suitable cost for the industrial sector.
@Khalid:
"So we are giving up the IP project which provides gas at the rate of 11 dollars MMBTU and going to import it from Qatar at the rate of 20 dollars per MMBTU."
First, the Establishment never intended to proceed with IP project. The Iran thing was used by the establishment as a "blackmail" tool to extract more concessions and free aid money from the US. Unfortunately for the establishment actors, the US called their bluff. Pakistan had to backtrack. Also, note that the IP would cost Pakistan about $3 billions to build the pipeline infrastructure. That is a lot of capital that Pakistan doesn't have.
In comparison, though the unit cost per mmbtu would be higher for the LNG import program, the capital needed to establish a decompression facility would be a lot lower at $300 Millions.
So we are giving up the IP project which provides gas at the rate of 11 dollars MMBTU and going to import it from Qatar at the rate of 20 dollars per MMBTU. I wonder how much of it is commissions.
Dear ET, I guess the price discount should be either 3% or 50 Cents (0.5$) not 0.5%. Kindly recheck that.