Qatar has revised downward the price of liquefied natural gas (LNG) to clear the way for a deal with Pakistan following a sharp decline in energy prices in the international market in the wake of increased LNG supplies.
“Qatargas, which was seeking $18 per million British thermal units (mmbtu), has now pushed it lower to $14-16,” said Shoaib Warsi, Managing Director of Sui Southern Gas Company (SSGC), while talking to the media here on Friday. For spot purchases, he said, the LNG price had come down to $10 per mmbtu in the market.
According to Warsi, a price committee has been constituted to negotiate with Qatargas, a major LNG producer in the world. Terms and conditions of an agreement are being finalised and the price is expected to be set next month.
He said a consultant of the US Agency for International Development (USAID) had recommended a short-term LNG import deal for two years to take further benefit of price fall in the global market.
The consultant is of the view that the LNG price may come down to $6 per mmbtu in the world market in coming years because of an overall decline in energy prices. However, Warsi said Qatar would be interested in striking a long-term deal.
He stressed that the government was following a two-pronged strategy for LNG import including a state-to-state deal and spot purchases for the short term.
Apart from seeking a contract with Qatar, the government is also in talks with Malaysian firm Petronas for LNG supply.
As the consultant believed that the LNG price decline would continue for the next five to six years, Warsi suggested that Pakistan should develop power plants to run them on imported LNG.
“Use of LNG in power plants will reduce fuel cost by 17% compared to the cost incurred when they are run on furnace oil.”
He declared that the government would not pursue a weighted average gas price policy after LNG imports and the use of LNG in power plants would protect consumers from the increase in prices. “The government has decided to provide LNG to the most efficient power plants.”
Gas distribution companies will lay transmission lines of 42-inch diameter to transport imported LNG from Karachi to Lahore. To receive LNG supplies, Engro is setting up a terminal at the Port Qasim that will be able to handle 600 million cubic feet per day (mmcfd).
“Gas companies will pick 400 mmcfd whereas Engro will sell 200 mmcfd directly to its clients,” Warsi said, adding SSGC had also floated a tender for building another terminal to handle 400 mmcfd to tackle the energy crisis.
Three investors including Jamshoro Joint Venture Limited (JJVL) and Turkish firm Global Energy were also working to set up an LNG terminal in Karachi, he said.
Govt to import 2bcfd
Ministry of Petroleum and Natural Resources Secretary Abid Saeed said on Friday the government was making arrangements to import 2 billion cubic feet of LNG per day in the next two years to meet energy needs.
“The government is trying to bring LNG from Qatar or any other supplier at lower prices,” he said while briefing the Senate Standing Committee on Petroleum and Natural Resources.
Saeed pointed out that at present LNG was available at different prices in the international market ranging from $8 to $22 per mmbtu. First LNG terminal would be completed by Elengy Terminal Pakistan Limited (ETPL) at the Port Qasim by the end of February next year, he said.
The SSGC MD told the panel that the company had issued a standby letter of credit worth $50 million to ETPL after receiving a letter of comfort from the Ministry of Petroleum. “The letter of credit was handed over to ETPL on October 21.”
Published in The Express Tribune, November 15th, 2014.
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