Unfriendly ties: US turns down Pakistan’s demand for LNG supply

Published: July 11, 2014
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Officials say the country missed an opportunity to purchase LNG at a cheaper rate from Qatar in the past. PHOTO: FILE

Officials say the country missed an opportunity to purchase LNG at a cheaper rate from Qatar in the past. PHOTO: FILE

ISLAMABAD: 

The United States has refused to enter into a liquefied natural gas (LNG) supply deal with Pakistan on a state-to-state basis and has instead suggested that Islamabad should strike an agreement with Qatar for gas import, but it could prove quite expensive.

Background interviews with some officials reveal that the government was upset over the US response, which denied LNG supply to a country that has been its key strategic partner since long.

On the other side, Washington has offered civil nuclear technology to Delhi and a US company has clinched an LNG supply accord with an Indian firm at $12 to $13 per million British thermal units (mmbtu).

The US has also piled pressure on Pakistan to prevent it from pushing ahead with a vital gas pipeline project with Iran, called the Iran-Pakistan (IP) pipeline.

“US is pressing Pakistan to source LNG supplies from Qatar in a government-to-government contract, but it will cost around $19 per mmbtu,” an official told The Express Tribune.

Separately, US firm ConocoPhillips, which is operating in Qatar, would also be able to offer LNG to Pakistan, he added.

ConocoPhillips has shareholding in a joint gas field between Qatar and Iran from where LNG is being exported to the entire world. The South Pars field, from where Pakistan was to import gas under the IP pipeline, is also shared by Iran and Qatar.

Experts are of the view that the government could not afford to pay a high LNG price to Qatar, which stands close to the furnace oil price of $20 per mmbtu. Pakistan could afford a price that is in the range of $13 to $15 per mmbtu, they say.

According to officials of the Ministry of Petroleum and Natural Resources, they asked the US government to commit LNG export, which could be quite cheap compared to Qatar.

US officials say they place no bar on non-Free Trade Agreement (FTA) countries including Pakistan on inking an LNG deal with US private enterprises.

All natural gas production and LNG manufacturing in the US is the endeavour of private enterprises, they say, adding the American government does not have any agreement to sell LNG and is not negotiating with any country for gas export.

Instead of the IP pipeline, the US favours another project called the Turkmenistan, Afghanistan, Pakistan and India (TAPI) gas pipeline. At this stage, however, this project only looks like a dream and is far from reality because of the unrest in Afghanistan.

Insiders believe the IP project, which was at an advanced stage, has been all but shelved following a $1.5 billion ‘gift’ to Pakistan from a friendly nation, widely believed to be Saudi Arabia.

Officials say the country missed an opportunity to purchase LNG at a cheaper rate from Qatar in the past. Now, a price negotiation committee is being constituted to bargain with Doha.

Meanwhile, Pakistan State Oil has floated a tender, seeking bids for LNG import. The government is working on three options to secure LNG supplies which include spot purchases, floating tenders and a government-to-government contract with Qatar.

Published in The Express Tribune, July 11th, 2014.

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Reader Comments (31)

  • numbersnumbers
    Jul 11, 2014 - 2:33AM

    Curious that in the article the US states that all natural gas and LNG production in the US is via private companies, and the government does not play a role in those sales!
    However, this article is titled “US turns down Pakistani demand (wow, since when can Pakistan Demand???) for LNG supply”!!!!!

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  • Saleem
    Jul 11, 2014 - 2:56AM

    Every country has a right to make decisions that are beneficial to it. Unless US is willing to supply LNG to Pakistan later should go ahead with Iranian pipe line project.

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  • Shuaib
    Jul 11, 2014 - 4:36AM

    Don’t import from Doha are guys nuts? Doha is being incredibly unreasonable and if any fool wants to buy gas at that price let them. The price of gas will go down as the US-led resistance towards Iran decreases and there is competition from Turkmenistan as well. Why would any fool import from Qatar when they can import from Iran and Turkmenistan?

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  • David Salmon
    Jul 11, 2014 - 5:03AM

    This article appears ignorant of the fact that the US government cannot conclude a state-to-state LNG agreement because it has no LNG to sell. LNG is owned and sold in the US by private companies. The US has said clearly that it has no objection to Pakistan making an LNG deal with any American company, and has pointed out that export licenses are given out without reference to which particular country will receive the gas. http://www.brecorder.com/fuel-a-energy/193:pakistan/1196785:lng-import-pakistan-can-negotiate-with-us-private-enterprises/?date=2014-06-26
    http://www.paktribune.com/business/news/Free-trade-US-places-no-curbs-on-LNG-export-to-Pakistan-12173.html

    I assume that a newspaper as reputable as the Tribune will inquire further and rectify this misconception.

    I will add this, as an American consumer of propane. (I live in the California hills.) The U.S., as a result of fracking, has a glut of natural gas. Prices have been below cost. Export offers a profitable alternative to U.S. gas companies, although it takes close to $2B to build an export LNP terminal. But the end result will be higher prices for U.S. consumers and U.S. industry, presently benefiting from low energy costs. So do pursue a large LNG contract: now is the time to buy, while U.S. prices are low. But don’t expect to get it without some non-govt U.S. opposition, and do expect to spend very large sums on terminals and shipping.

    imho,

    David Salmon

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  • unbelievable
    Jul 11, 2014 - 5:10AM

    Unfriendly ties? Bogus attention getting title. As explained in the article all USA oil/gas production is owned by private industry and the USA govt doesn’t sell gas to anyone. That’s pretty basic stuff and if Pakistan is ever going to resolve it’s energy issues it should consider hiring some qualified people.

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  • Gp65
    Jul 11, 2014 - 5:12AM

    When US government is nit involved in production or sale of LNG, how can they enter into a state to state contract with Pakistan?
    There is no special issue about IP pipeline. The sanctions affect all projects with Iran and IP pipeline is not an exception. In any case, the sanctuons were imposed in 2011. Can someone please mention why this project was not consummated earlier when it was started in 1996? Also why was the agreement with Iran signed knowing full well that its wold be subject to the sanctions?
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  • PRAKASH LAL
    Jul 11, 2014 - 5:51AM

    What a misleading heading while in the detail report it clearly states that US government does not make state to state agreement for LNG supply and Pakistan is free to source LNG from US companies like India.

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  • objective observer
    Jul 11, 2014 - 7:01AM

    Strategic assets are undermining strategic energy supplies.

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  • Sri Varahadev
    Jul 11, 2014 - 7:08AM

    How does the US refusing “to enter into a liquefied natural gas (LNG) supply deal with Pakistan on a state-to-state basis” constitute “unfriendly ties” when there is no US “State” owned entity involved in the LNG selling business?
    The above question needs be explained in detail. Till that detailed explanation is furnished, this is a wholly misleading article.

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  • odd
    Jul 11, 2014 - 7:50AM

    “All natural gas production and LNG manufacturing in the US is the endeavour of private enterprises, they say”

    This is true, no? They are extreme capitalists. The US Government does not engage in business. What was the Pakistani government expecting from the US government?

    Last year the import price from Qatar was given as $18 mmbtu. Price has gone up as the risk of dealing with Pakistan gone up. We don’t have dollars to buy LNG and so all this renegotiation drama goes on and on.

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  • Syed baqar ahsan
    Jul 11, 2014 - 8:16AM

    Nothing new from USA to Pakistan-at all “critical juncture ” this is done to us and always very strangely American politicians say we give so much to Pakistan through USAID,then why they hate us.

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  • Syed baqar ahsan
    Jul 11, 2014 - 8:27AM

    People from within Pakistan are main culprits who play double gaming with public,mostly the dirty politician-retired general/babu create firm and play from both side.

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  • Rana Ajeet
    Jul 11, 2014 - 8:33AM

    Pakistan was never a reliable ally of US in war on terror.Pakistan govt and army were covertly supporting Af Taliban with man, money and machine and paki terrorists leaders were overtly supporting Af Taliban.Now its time to pay back.Punishment to Pakistan by US and EU with become more intense after US and NATO exit from AF after 2014 which may include trade and visa sanctions

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  • Weirdity
    Jul 11, 2014 - 9:32AM

    I am sure Qatar, as a part of the ummah, would give Pakistan an ummah discount for the natural gas.

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  • Neo
    Jul 11, 2014 - 9:34AM

    US is dictating terms how US donated should be used ?

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  • vasan
    Jul 11, 2014 - 9:52AM

    I dont understand this article at all. US says it is not in any business to sell or buy gas. Deal with private companies. India has struck a deal with a private company. This article claims US govt has offered nuclear technology to India. Except for changes to rules and laws, I wonder what has US offered to India,. And usual a pakistani whinges and whines comparing noncompatible things with India.

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  • bahaha
    Jul 11, 2014 - 10:02AM

    Evil uncle Sam has been pushing Qatar over Iran for a long time.- even though Iran is nearer Pakistan We should never put all our eggs in one basket. Try china! – better still stand up to America

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  • Jul 11, 2014 - 10:55AM

    Qatar option is very expensive and not helpful at that cost. Pakistan should always follows and look towards their interests whether that will please it’s so called friend and long time ally which is US. Iran is far better option for Pakistan not just as a importing gas from but as a regional friend. Enemy’s enemy is a friend.

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  • umaima
    Jul 11, 2014 - 10:56AM

    If Pakistan want LNG at $12 to 13 mmbtu, go ahead sign a deal wih a private US company…like India did. Alongside, discover and develop gas sources in Balochistan and Sindh. The best measure would be the development of renewable energy sources…it woud be tough amd costly in the short run but we wont have to worry about running out in future

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  • malik
    Jul 11, 2014 - 11:07AM

    We need to concentrate on finding indigenous resources for gas and oil as international market is too pricey. We also have lot of shale gas and oil but don’t have the technology. We need to find someone willing to invest in these shale has reserves; that is after we are done with terrorism.

    Recommend

  • AVM Polpot
    Jul 11, 2014 - 11:14AM

    Do any readers recall the price of the Iranian Gas plus the investment in the pipeline?
    ++++++++++++++++++++++++++++++++++++++++
    and of course the 3 Mn USD Penalty per day applicable from 1.1.2015.

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  • globalobserver
    Jul 11, 2014 - 11:14AM

    What really happened was that Pakistan wanted the US government to subsidize the LNG to bring the price down from $19 to $15 as a free dole-out. This, the US refused.

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  • objective observer
    Jul 11, 2014 - 2:54PM

    The irony is Pakistan’s only option is through Afghanistan from Tajikistan. They would have international support and funding and have cheap consistent gas and electricity through that route.

    Strategic assets are pretty damn expensive if you ask me. They make you pay 6-7 dollars more per mmbtu,

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  • Naresh
    Jul 11, 2014 - 4:36PM

    From the Article : Insiders believe the IP project, which was at an advanced stage, has been all but shelved following a $1.5 billion ‘gift’ to Pakistan from a friendly nation, widely believed to be Saudi Arabia.
    .
    From the Article : Insiders believe the IP project, which was at an advanced stage, has been all but shelved following a $1.5 billion ‘gift’ to Pakistan from a friendly nation, widely believed to be Saudi Arabia.
    .
    This is a fact and the only reason for Pakistan has shelved the IP Project. As such blaming the USA is an exercise in futility!
    .
    @Gp65: Can someone please mention why this project was not consummated earlier when it was started in 1996? Also why was the agreement with Iran signed knowing full well that its would be subject to the sanctions?
    .
    This project should have been by an Underwater Deep Sea Pipe Line where he major leg was from Oman to India – beyond the Maritime Economic Zone of Pakistan so that neither Transit Dues nor any “interferences” by the Pakistan Establishment – Governmental, Political or Military – would occur as compared to the Land Pipe Line via Pakistan wherein Pakistan demanded an Extortionist Rate as compared to the Huge Network of Pipe Lines from the Soviet & Former Soviet Union Republics to Western Europe. There was a report that the a Pakistan Federal Secretary (I think in the Petroeum related Department) declared that India would have to pay a sum which was REASONABLE and compared to other Pipe Lines Transiting Countries “On the Way”.
    .
    President General Musharaf had him removed and kept up the Extortionist Rate. However, the real culprit was the One and Only Mani Shanker Aiyer who as Minister of Oil and Natural Gas negotiated the Purchase of Natural Gas from the NIOC or its sister concern “subject to Iranian Parliament Approval”. There has been no Sale and Purchase Contract by any Country with another Country – that I know of – where such a Contract is agreed. India negotiated with the Government and Private Sectors of Iran in respect of Kudrumukh Iron Ore Contract as also various contracts i.e. Sale of Sugar, Rice etc. even the “Servicing” of Iranian Submarines by Indian Shipyards as well as the Indian Navy Facilities. THE IRANIAN PARLIAMENT did not approve the contract as it saw the Energy prices especially Natural Gas starting to increase.
    .
    Finally even the Government of India got “Cold Feet” when the Pakistani Security started to give Grave Concerns to the Indian Authorities. I believe India considered paying for the Natural Gas being delivered at the Indo-Pak Border but the Iranians wanted to be paid on delivering it at the Iran-Pak Border.
    .
    Be that as it may MSA – the man who wants India to an Uninterrupted and Uninterruptible Dialogue with Pakistan – and thereby India lost a Great Opportunity to secure “Reasonably” priced Natural Gas from Iran. It is to be kept in mind that MSA’s “naivety” affected Pakistan FAR FAR MORE ADVERSELY than to India and Pakistan’s intransigence with respect to “Transit Dues” as also the suitable guaranty of security to India – which could have been eventually provided – by Pakistan to India’s satisfaction.
    .
    For your Guidance : INTEC which carried out the Survey and Project Report in the period 1992-1995 has changed hands a couple of times. Here is a Link to “Deep Ocean Corrosion Research In Support Of Oman India Gas Pipeline – Publish Date: 5/1/1995 :
    .
    http://www.intecsea.com/publications/technical-publications/424-deep-ocean-corrosion-research-in-support-of-oman-india-gas-pipeline
    .
    FOR FURTHER DETAIILS PLEASE “GOOGLE” for INTECSEA + WorleyParsons Group.
    .
    The above is to the the best of my knowledge and I am sure there may be other contributing factors.

    CheersRecommend

  • unbelievable
    Jul 11, 2014 - 5:35PM

    @malik:

    We need to concentrate on finding
    indigenous resources for gas and oil
    as international market is too pricey

    Rubbish – gas prices are low – your just used to the govt subsidizing price and since your broke that equates to the rest of the World loaning you money so you can keep the subsidies. Time to get rid of the subsidies … time to pay your utility bills … time to pay market prices like the World.

    Recommend

  • Citizen26
    Jul 11, 2014 - 5:52PM

    If we had made a regional alliance like EU or NAFTA etc with our neighbouring countries then we wouldn’t had been begging other nations for a gas.

    Looks like a child is asking for a Ice-cream and step-dad has refused and insists that kid should only get tap water to drink.

    We as a nation need to understand that having good economic relations and alliances gives you higher standard of living and less problems. Afterall we are all human beings, who speak similar languages and share similar traditions.

    Recommend

  • Faraz
    Jul 12, 2014 - 1:57AM

    shelved the all important IP gas project for pennies (1.5bn USDs), given as bribe/charity by saudis. how many masters do we have. shame on this leadership

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  • Bakhtiyar Ghazi Khan
    Jul 12, 2014 - 2:55AM

    ET, if my comments as a Pakistani are censored. I request removal of all Indian anti-Muslim anti-Pakistan comments as well, which I was replying you.

    Also, why are comments critical of US or India censored on your website? I am a Pakistani from KPK and I have every right to comment on my country.

    Recommend

  • Ashraf
    Jul 12, 2014 - 7:34AM

    I am sure the Ummah brothers will give the gas for free. After all, Pakistan is the great defender of the Ummah and a protector of the religion worldwide !!

    Recommend

  • JustType
    Jul 23, 2014 - 2:34AM

    Oh please ET! You must have realized now; your readers are better informed than you thought. Not just U.S govt don’t sell LNG it’s facing tough fight from environmentalists and Green house gas advocated to stop LNG production for its heavy Carbon Footprint along with Destruction of land and it’s resources in the process of Fracturing for its procurement. The environments also proved LNG production & sales delays procurement of other Earth Friendly energy resources.

    U.S., Unlike Pakistan, listen and follows the guidelines pressed by its people that challenges it’s heavyweight corporations.

    Recommend

  • iRob
    Jul 23, 2014 - 8:36AM

    @Faraz:
    I knew, they were not “Only” coming for hunting near-extinct & priceless birds but “Other” issues too.

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