Law Division clears way for LNG imports from Malaysia

Pakistan will ink deal worth billions with Malaysia without inviting bids


Zafar Bhutta October 31, 2017
LNG Terminal. PHOTO: REUTERS

ISLAMABAD: The Law Division has vetted and cleared the draft of an inter-governmental agreement for the import of liquefied natural gas (LNG) worth billions of dollars from Malaysia without going into the bidding process.

“The Ministry of Foreign Affairs has also conveyed that the Malaysian government is ready to sign the LNG deal with Pakistan,” a senior government official said while talking to The Express Tribune.

According to the official, the government is working on different choices for adequate gas supply and to tackle the energy crisis. LNG purchase is among the options.

Natural gas is contributing 50% to primary energy supplies, therefore, the Petroleum Division has planned to import LNG from different countries through contracts between governments to bridge the widening shortfall.

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Keeping in view the growing demand, the government plans to import 3,600 million cubic feet of LNG per day (mmcfd). At present, imports stand at 600 mmcfd, which will be doubled to 1.2 bcfd before year-end after the second LNG terminal starts working.

The official argued that LNG imports from reliable producers and suppliers in state-to-state arrangements would prove beneficial in terms of security and flexibility of supplies, extended credit facility, consistently reliable quality, timely availability and guaranteed procurement.

The cabinet has already given the go-ahead for negotiating the government-to-government LNG deal with Malaysia through their nominated entities in June this year.

The Petroleum Division, through the Ministry of Foreign Affairs, shared the agreement’s draft with the Malaysian government for its views and comments. In response, Malaysia conveyed its concurrence and agreed to sign the inter-governmental deal.

The Petroleum Division also sought approval of the cabinet in a meeting held on October 18. It said following the signing of the inter-governmental agreement, Malaysia-nominated Petronas LNG Limited and Pakistan LNG Limited would sign a commercial agreement. After detailed discussions, the cabinet gave its approval.

Pakistan’s first LNG terminal with re-gasification capacity of 600 mmcfd has been running at Port Qasim since March 2015. Second such terminal with the same processing capacity is nearing completion and it is likely to start working before the close of current calendar year.

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In the private sector, three more LNG terminals are planned to be set up to handle the increase in imports.

The government is developing three LNG-based power plants in Punjab with production capacity of 3,600 megawatts. One of them has already started power generation and the three will need 600 mmcfd of LNG as fuel.

Pakistan produces 4 billion cubic feet of natural gas per day (bcfd) whereas the shortfall exceeds 2 bcfd. Now, all locally produced gas has been allocated to domestic consumers whereas industrial and commercial consumers are receiving imported gas.

Published in The Express Tribune, October 31st, 2017.

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