LNG import from Qatar: Ministry eager to form high-level price negotiating body

Seeks ECC’s approval for committee that will finalise gas price deal.

ISLAMABAD: The Ministry of Petroleum and Natural Resources has decided to seek approval of the Economic Coordination Committee (ECC) for constituting a high-level negotiating committee comprising representatives of key ministries, investment board and gas utilities to finalise a gas price deal with Qatar.

The move is apparently aimed at shifting the responsibility of price negotiations to all the ministries concerned, which will either be involved in importing liquefied natural gas (LNG) from Qatar, making payments and utilising it in power plants, officials say.

The Ministry of Petroleum has submitted a summary with the ECC, seeking its go-ahead for constituting the price negotiating committee.

The ministry suggested that the committee should comprise petroleum secretary as chairman and members should include representatives of the Board of Investment, ministries of finance, law and water and power and managing directors of Pakistan State Oil (PSO), Sui Northern Gas Pipelines Limited (SNGPL), Sui Southern Gas Company (SSGC) and Inter State Gas Systems (ISGS).

The ministry wanted to include representatives of the finance ministry in the face of major challenges like negotiating a contract with consultants and arranging three-month letters of credit amounting to around $800 million.

The petroleum secretary could not be reached for comments.

Giving the justification behind the proposal, senior government officials said fast-track LNG import from Qatar was a capital-intensive project of national importance, underlining the need for a price negotiating committee.

Though initial discussions had been held with Qatar on gas import, the price would be negotiated after the two sides agreed on operational and commercial terms, they said.

PSO and Qatargas have been nominated by their respective governments to negotiate the draft of the Heads of Agreement (HOA) – a non-binding document outlining the main issues relevant to a tentative partnership agreement. It represents the first step on the path to a full legally binding agreement.

The petroleum ministry has also constituted a team comprising officials of PSO, SNGPL and SSGC to hold deliberations on technical and operational aspects of the HOA.

Following ECC and cabinet approvals, SSGC and Elengy Terminal Pakistan Limited (ETPL) signed an LNG services agreement on April 30 for providing storage and re-gasification services under a tolling fee arrangement.

ETPL also initialed an implementation agreement with the Port Qasim Authority on May 23 to develop and run an LNG terminal at the port.

The government is working on three options for LNG import including a state-to-state contract with Qatar, through competitive bidding and spot purchases.

“Apart from direct LNG import from Qatar, a bidding process was initiated and Expressions of Interest were sought on May 30 this year through advertisements in the national and international press,” an official said.

Published in The Express Tribune, June 18^th, 2014.

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