Filling vacuum: Russia offers LNG export after two years

Could supply gas at a cheaper price that will help ease energy shortages

ISLAMABAD:

Russia has offered Pakistan the export of liquefied natural gas (LNG) in a government-to-government contract to help tackle energy shortages in a proposal that reflects similar gas supply arrangements with other countries.

“Russia has told Pakistan that it is willing and ready to export LNG after two years,” an official told The Express Tribune. “Moscow has already inked energy deals with some countries and could create space for Islamabad in the next two years.”

The offer comes after the United States refused to enter into a state-to-state LNG supply deal with Pakistan.

The government desperately needs to tap vital sources of energy as domestic gas availability is expected to go down 50% from the current 4 billion cubic feet per day (bcfd) by 2020 because of a sharp fall in production from existing major fields.

Officials call the Russian offer encouraging at a time when the US has turned down the request for LNG export.

In an agreement with Russia, India is allowed to import 2.5 million tons of LNG through pipelines each year. Moscow is also supplying LNG to South Korea, charging a price of $8 per million British thermal units (mmbtu).

“Keeping in view the $8 price, there is a possibility for Pakistan to import LNG at a much cheaper rate,” the official remarked.

At present, LNG supplies can be sourced from Qatar and the government is trying to clinch a deal.



“Qatar is ready to provide LNG on a fast-track basis whereas no other country is willing to export gas immediately,” the official said, adding the government was putting on efforts to finalise a contract with Doha.

Sui Southern Gas Company (SSGC) has already awarded a contract to Elengy Terminal Pakistan Limited for constructing an LNG terminal, which will start operations by March this year.

In meetings with officials of the previous Pakistan Peoples Party-led government, Qatar had offered to export LNG at a price equivalent to 14.7% of the Brent crude oil price, when it was hovering around $110 per barrel in the international market.

Later, Doha pushed the price down to $17.437 per mmbtu, a 0.5% discount over the previous rate of $18.002 for the 20-year lifetime of the project.

The price did not cover the capital cost of LNG terminal and its charges, import expenses, re-gasification, wastage and shipping costs. The additional costs would add about $2.084 per mmbtu to the quoted price.

Though the cabinet had given the go-ahead to SSGC to purchase LNG from Qatar, but it did not approve the offered price.

Published in The Express Tribune, January 11^th, 2015.

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