Gas supply: Indian demand for higher price scuttles LNG deal

Delhi seeks $21 per mmbtu, higher than regional average of $16.

ISLAMABAD:

In yet another setback after Pakistan and India failed to open up trade earlier this year, a plan to enter into liquefied natural gas (LNG) supply deal could not be pushed through as Delhi refused to budge from its stance and insisted on higher prices.

“India was not willing to show flexibility during talks held with Pakistan in the last week of March. It quoted $21 per million British thermal units (mmbtu), higher than the price of around $16 being offered in the region,” an official told The Express Tribune.

Indian authorities pointed out that they had different types of taxes on LNG, which could be waived by their government to make the deal feasible.



Soon after their return from a visit to the United States, which refused LNG export to Pakistan, government officials went to India to engage into talks on its import through Wagah border by laying a pipeline to meet energy needs of Punjab. However, the negotiations got stuck in the face of higher price sought by India.

According to officials, the LNG price was even higher than the cost of expensive furnace oil being used in power plants. The price was also quite unattractive when compared with $18 per mmbtu quoted by Qatar and $11 set by Dutch firm 4Gas in January 2011 for gas supplies.

They suggest that Pakistani and Indian prime ministers could take some initiatives to push through an agreement.

Under the proposed plan, India was to lay a 60-km pipeline from Bhatinda to Wagah border whereas Pakistan was to build a 30-km pipeline to inject gas into the Sui Northern Gas Pipelines Limited (SNGPL) system.

Pakistan desired to import 200 million cubic feet of gas per day (mmcfd) initially with the possibility of stepping up supplies in the long run.

“LNG import from India is the most viable option in present times as there will be no capital cost involved and supply can be started within months of agreeing on a deal if India brings down the price,” the official said.

“If Pakistan imports LNG through Karachi, the cost of just laying a pipeline from Karachi to Lahore will be $1.4 billion.”

India was itself an importer of LNG and would charge international prices, the official added.

India had inked a deal with Qatar for LNG import in 2004 while Pakistan tried but failed to secure a contract with Qatar in 1991.

Published in The Express Tribune, May 3^rd, 2014.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.