President to press Qatar to scale down LNG price

Deadlock over price has delayed deal on supply of 500 mmcfd of gas.

ISLAMABAD: President Asif Ali Zardari is all set to press the Qatari government during his visit to Doha to scale down the price of liquefied natural gas (LNG) offered to Pakistan in order to clear the way for a multi-billion-dollar LNG supply deal between governments of the two countries.

Adviser to Prime Minister on Petroleum and Natural Resources Dr Asim Hussain is also accompanying the president during the trip, beginning Tuesday, sources say.

In a term sheet submitted to Pakistan, Qatar has demanded a price of $18 per million British thermal units (mmbtu) for supply of 500 million cubic feet per day (mmcfd) of LNG, but Pakistan turned it down.

“Pakistani high-ups have also held meetings in Dubai and London with a delegation of US energy giant ConocoPhillips – designated by the Qatari government to negotiate the LNG supply deal – but the two sides could not finalise the price,” a source said, adding now President Zardari’s visit to Qatar might lead to some headway.

ConocoPhillips has submitted draft of a memorandum of understanding (MoU) for LNG supply, but the MoU is just an understanding and is not binding. The company seeks to sign an MoU with state-run Sui Southern Gas Company (SSGC).

ConocoPhillips is negotiating the deal because it holds a 30% share in oil and gas reserves in North Field, a big gas field along the Qatar-Iran border, from where LNG will be supplied to Pakistan.

Pakistan and Qatar have already signed an MoU, under which Islamabad will import 500 mmcfd of LNG that will help generate 2,500 megawatts of electricity.

According to the sources, Pakistan has offered a price of $10 per mmbtu, which Qatar has not accepted and this has caused a deadlock between the two sides. Qatar seems to be least interested in Pakistan’s market as it has found a big market for LNG in Japan after last year’s earthquake that destroyed a nuclear power plant there.

“Pakistan has sprung into action quite late as many other countries have already booked LNG supplies from Qatar, including India which struck a deal many years ago,” an official of the Ministry of Petroleum and Natural Resources said.

After Japan’s earthquake and tsunami, prices of LNG also went up due to rising demand for LNG from the far eastern country, he said.

The ministry official expressed fears the LNG import plan may hit a stumbling block as the Economic Coordination Committee (ECC) of the cabinet has approved another project for import of 1 billion cubic feet per day (bcfd) of LNG.

Some officials suggest the government should have entered into a deal with Qatar, before going ahead with alternative plans.

The government is also engaged in talks with India for LNG import through a pipeline from the Indian territory to Wagah border to meet energy requirements of Punjab.

Published in The Express Tribune, November 7^th, 2012.