Exploring other avenues : SSGC, ConocoPhillips likely to sign LNG supply deal

Sui gas company vetting draft of MoU prepared by US firm.

ISLAMABAD:

US energy giant ConocoPhillips and Pakistan’s state-run gas distributor Sui Southern Gas Company (SSGC) are expected to sign a memorandum of understanding (MoU) for import of liquefied natural gas (LNG) from Qatar to meet pressing energy needs.

“ConocoPhillips has submitted a draft of the MoU to SSGC, which is being reviewed by the gas utility,” an official told The Express Tribune.

The Qatari government has designated ConocoPhillips, which has a stake in North Field – a big gas field along the Qatar-Iran border, to strike an LNG supply deal with Pakistan.

Pakistan and Qatar have already signed an MoU under which Islamabad will import 500 million cubic feet per day (mmcfd) of LNG to generate 2,500 megawatts of electricity.

Headquartered in Houston (Texas), ConocoPhillips has operations in about 30 countries and has a 30% share in oil and gas reserves being explored under the Qatargas-III project in the North Field from where LNG will be supplied to Pakistan.

According to sources, the Qatari government has told Pakistan that it has sold its share of LNG to some countries and Pakistan should approach ConocoPhillips to purchase LNG from its reserves.

Earlier, Qatar had designated Shell to finalise the LNG contract with Pakistan, but the Anglo-Dutch giant could not be reached because of controversy over the Mashal LNG import project.

Pakistani high-ups have held several meetings with the representatives of ConocoPhillips in Dubai and England, aimed at clinching a deal. The company has refused to export LNG through middlemen and wants to strike direct deal with a state-run enterprise like SSGC, say government officials.

In a term sheet sent to Pakistan earlier, Qatar demanded a price of $18 per million British thermal units (mmbtu) for LNG. Pakistan offered $10 per mmbtu.

“ConocoPhillips has not quoted a price in the draft of MoU sent to SSGC,” an official of the Ministry of Petroleum and Natural Resources said.

However, government officials express fear that the plan for LNG import from Qatar may be scuppered as the Economic Coordination Committee (ECC) – the highest economic decision-making body – has approved other projects for import of 1 billion cubic feet per day (bcfd) of LNG.

Some officials are the view that the government should have gone for a deal with Qatar on a government-to-government basis before pushing ahead with the new LNG import programme.

The government is making efforts to import LNG from India as well and private sector companies are also actively working on the import of LNG.

The North Field, situated along the Qatar-Iran border in the Persian Gulf, is shared by the two countries. Iran calls it South Pars field, the world’s largest, from where Pakistan will be supplied gas under the Iran-Pakistan gas pipeline project.

According to reports, delay and low production by Iran may shift some gas reserves to the Qatari side and lead to loss of yield due to low pressure.

US embassy officials in Pakistan have also been lobbying and holding meetings with stakeholders of the energy sector in a bid to convince them that the Iran gas project is not viable for Pakistan.

Terming the IP pipeline a bad project, US diplomats stress that Pakistan should shelve the programme and ink LNG deal with Qatar to meet energy needs. Consultants of US aid agency USAID are also providing technical help to the petroleum ministry to materialise plans for LNG import.

Published in The Express Tribune, October 26^th, 2012.