Ignoring cheaper offer, ECC goes for Qatar LNG

Published: March 28, 2019
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ISLAMABAD: Pakistan on Wednesday decided in principle to import 200 mmcfd additional Liquefied Natural Gas (LNG) from Qatar under a government-to-government deal, ignoring a relatively cheaper offer from Saudi Arabia.

The Economic Coordination Committee (ECC) of the cabinet decided to import the additional gas quantity and asked the Petroleum Division to propose a price negotiations committee to the ECC, said the Finance Ministry officials.

In its next meeting, the ECC would approve the negotiations committee.

The ECC also gave a panel yet another extension in the deadline for preparing a revival plan for closed Pakistan Steel Mills. It also deferred a decision for revising the payments terms of power plants that are run on imported LNG.

Against the weekly payments to the LNG suppliers, the government makes monthly payments to the independent power plants (IPPs) – a mode that has resulted in generating over Rs60 billion circular debt.

“On a proposal of the Petroleum Division regarding arrangements of additional 200 mmcfd of LNG from Qatar, the ECC directed the division to carry out a comprehensive demand/supply analysis of LNG in the country, in consultation with stakeholders, including Law and Justice Division, and submit a summary to the cabinet in this regard,” said a handout of the Finance Ministry.

The ECC took the decision of importing LNG from Qatar a day after Petroleum Minister Ghulam Sarwar told journalists that Qatar had offered lower price for additional 200 mmcfd gas compared to the existing price. He said Saudi Arabia had also offered the LNG at even cheaper rates while Pakistan also had a memorandum of understanding with Malaysia for LNG trade.

The petroleum minister had also claimed that the government was under no obligation and would go for the cheapest purchase and take a decision in the best national interest. But the ECC on Wednesday decided to explore the possibility of importing the LNG from Qatar on government-to-government basis.

Nadeem Babar, the Energy Task Force chairman, told journalists on Monday in presence of Prime Minister Imran Khan that Qatar’s fresh offer was 20% cheaper than the earlier long-term contract.

Under the previous 15-year long-term deal, the LNG per mmbtu price was $9.22 at current crude oil prices. At 20% discount the new price will be $7.38 that is still expensive than the spot purchases.

The government wants to sign new LNG import deals aimed at meeting the gas supply and demand requirements. Babar had said Pakistan signed 800 mmcfd LNG import contracts but its needs were close to 1,400 mmcfd.

A Pakistani delegation comprising petroleum secretary and Nadeem Babar visited Qatar this month and placed demand for additional gas supply in an effort to meet growing gas needs of power plants in the upcoming summer season.

The ECC discussed the issue of setting up a third LNG terminal to cater the additional supply. Maritime Affairs Division briefed the ECC about the progress on new LNG terminal, said the Finance Ministry.

It said Finance Minister Asad Umar directed Maritime Division to expedite the process for establishment of a new LNG terminal in view of the increasing demand for gas in the country.

The government wants to complete the third LNG terminal before the 2020 winters to avoid a repeat of the acute gas shortage. The ECC directed the Maritime Affairs Ministry to complete its report in 2 weeks.

Reportedly, Bahria Foundation was working on building the new LNG terminal at Sonmiani connected to the Hub-Nawabshah gas pipeline project without any public funding.

Pakistan Steel Mills plan

The ECC on Wednesday yet again extended the deadline to prepare the revival plan of Pakistan Steel Mills. It was the second extension that the ECC has given to the committee working on the plan. Finance Minister Asad Umar set April 15 as the new deadline.

The Ministry of Industries and Production informed the ECC) that the operationalisation plan for the country’s largest but closed industrial unit cannot be prepared by the revised deadline of March 31.

Earlier, in November last year, the ECC had given the Ministry of Industries two months to submit an operationalisation plan, which ended on January 7.

The government has engaged an experts group from the private sector on a pro bono basis to do the job. The expert group, headed by the Hub Power Company CEO Khalid Mansoor, sought extension on the grounds that Mansoor was abroad. The federal government has been paying salaries to the employees without doing any work for almost last four years, as the industrial unit remains closed.

Containers at dry port

The ECC also waived penal surcharges to clear the containers that are stuck up on the dry ports. The penal surcharges are charged when the importers do not clear the consignments within a prescribed timeframe.

The ECC did not approve a proposal of Ministry of Commerce to setup an Insurance Regulatory Authority by withdrawing these functions from the Securities and Exchange Commission of Pakistan (SECP). It gave two-month deadline to the SECP to improve its regulatory functions.

The committee also accorded approval to the proposal of the National Counter Terrorism Authority (Nacta) by granting it technical supplementary grant of Rs.133.156 million.

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