LNG terminal contract: Cabinet expected to give the final go-ahead

It will lead to gas supply agreement with Qatari govt.

ISLAMABAD:

The cabinet, which is slated to meet on Friday, is likely to award a multi-million-dollar liquefied natural gas (LNG) terminal contract to Elengy Terminal Pakistan Limited (ETPL). The prime minister had sent the matter to the cabinet for final approval.

The award of contract is expected to pave the way for LNG imports from Qatar on the basis of a government-to-government deal. Earlier, Doha had asked Pakistan to first put in place an LNG handling facility before going for imports.

The government is stepping up efforts to bring first LNG supplies in the current calendar year and has assigned Pakistan State Oil (PSO) the task to import gas from Qatar because of its sound financial position.

“If the cabinet gives the go-ahead, the country’s first LNG handling facility will be set up, leading to a supply deal with Qatar on a state-to-state basis,” a senior government official told The Express Tribune.

The terminal would handle 200 million cubic feet of LNG per day (mmcfd) in the first phase and 400 mmcfd in the second phase, which will begin next year.

Besides imports from Qatar, the government was also exploring the possibility of inviting tenders for LNG supply from private players. “Multinational companies like Royal Dutch Shell have expressed interest in arranging LNG supplies, which will be possible through floating tenders,” the official said.

The Economic Coordination Committee (ECC) of the cabinet, in its meeting held on February 28, had approved, in principle, the award of LNG terminal contract to ETPL depending on formal approval of the cabinet or prime minister.

In the meeting, the Law Division said Section 21 of the Ogra Ordinance 2002 empowered the federal government to issue policy guidelines to Ogra. After the 18th Amendment to the Constitution, the definition of term “federal government” had been changed and the federal government, or the prime minister, could give proposed policy guidelines directly or through a federal minister.

ETPL, who had been declared a successful bidder, had quoted a tolling fee of 60 cents per million British thermal units (mmbtu). This price had been approved by the consultant.

According to officials, this price was evaluated and matched with regional tolling fee for terminal services and therefore the cabinet was being requested to approve the award of contract.

However, the ECC was upset about payment of millions of dollars in capacity charges to ETPL by PSO even though it was unable to import LNG from Qatar. The economic managers asked PSO to carry out due diligence before issuing a letter of comfort for LNG import.

The board of directors of Sui Southern Gas Company (SSGC) had approved an LNG services agreement with ETPL subject to the condition that PSO would issue a letter of comfort to SSGC and would pay capacity charges.

“The federal government controls PSO, so the letter of comfort to be issued by the company would have a bearing on taxpayers’ money. Therefore, before issuing the letter, PSO should carry out due diligence,” ECC members observed.

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

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