Moving closer: Qatar agrees to slash price for LNG export

Sale price, volume to be finalised during talks in Doha next month.

ISLAMABAD:

Qatar has offered to revise the price down for export of liquefied natural gas (LNG) to Pakistan in a proposed government-to-government arrangement that will help ease acute energy shortages.

“Qatari government has agreed to slash the LNG price further compared to its earlier offer during talks in Islamabad early this month,” a source told The Express Tribune.

The price will be negotiated and finalised in talks between ministers of the two countries in Doha on February 8. The volume of LNG imports would also come up for discussion.

Petroleum Minister Shahid Khaqan Abbasi will lead the Pakistani delegation during the deliberations.

Earlier, during meetings with officials of the previous PPP-led government, Qatar had offered to export LNG at a price equivalent to 14.7% of Brent crude oil rate when it was hovering around $110 per barrel in the international market.

Later, Doha pushed the price down to $17.437 per million British thermal units (mmbtu), a 0.5% discount over the previous rate of $18.002 per mmbtu for the 20-year lifetime of the project.

The price did not cover capital cost of LNG terminal and its charges, import expenses, re-gasification, wastage and shipping costs. The additional costs would add about $2.084 per mmbtu to the quoted price.

Though the cabinet gave the go-ahead to Sui Southern Gas Company (SSGC) to purchase LNG from Qatar, but it did not approve the offered price.

Sources said Pakistan and Qatar would also discuss, during talks early next month, the possibilities of forming joint ventures between state-owned companies of the two countries like Oil and Gas Development Company (OGDC) and Pakistan Petroleum Limited (PPL).

According to a senior government official, the Qatari government is willing to make first delivery of LNG by November this year but it has stopped short of giving firm assurances. However, Qatari officials were flexible in finalising supply arrangements, he said.



Preliminary talks

On January 2, a delegation of Qatar Gas Company comprising Abdullah Ahmad Al Hussaini and Hamad Abdul Aziz Al Mahanadi held preliminary talks with senior officials of the Ministry of Petroleum and Natural Resources, Inter-State Gas Systems, Sui Southern Gas Company and Pakistan State Oil.

Pakistan said it was eager to buy 200 million cubic feet of LNG per day (mmcfd), which would be re-gasified at the terminal being set up by Engro Vopak Terminal Limited (EVTL) at the Port Qasim and later injected into the system.

By 2015, the volume will be increased up to 400 mmfcd. Pakistan is interested in importing two billion cubic feet per day in the next two-and-a-half years.

According to the official, the Qatari delegation assured the Pakistani side that they had enough gas, but they did not commit any volume. They were just flexible and assessed Pakistan’s requirement and progress on setting up the LNG import handling facility.

Voicing satisfaction over the financial health of Pakistan State Oil – the oil marketing giant with extensive experience in importing and meeting oil needs of the country – the Qatari delegation believed that the company would encounter no difficulty in opening letters of credit for LNG import.

Pakistani side said it would purchase some quantity of LNG from Qatar on a government-to-government basis and more would be imported through spot purchases from global markets. 

Published in The Express Tribune, January 21^st, 2014.

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