While the private sector has imported LNG from Qatar on its own expense, the arrival of the fuel is yet to be arranged on a government-to-government basis. PHOTO: REUTERS
A few kinks still need to be ironed out before Pakistan can import liquefied natural gas (LNG) from Qatar on a government-to-government basis.
Refusal of the independent power producers (IPPs) to give stand-by letter of credit, a scheduled port study on May 6 and the payment mechanism are some of the issues that need to be resolved before LNG can be imported from Qatar, said Petroleum and Natural Resources Minister Shahid Khaqan Abbasi while addressing a press conference in Islamabad.
While the private sector has imported LNG from Qatar on its own expense, the arrival of the fuel is yet to be arranged on a government-to-government basis.
Qatar officials are expected to carry out a port study on May 6. A positive feedback would sort out one of the three issues Abbasi mentioned on Thursday.
“Refusal of IPPs to give letter of credit, the port study and payment mechanism are three major issues that need to be resolved before importing LNG from Qatar,” Abbasi said.
“There were 82 issues of various kinds around the import of LNG. Only three issues are left now. Pakistan and Qatar have signed a master sale agreement but it is not a commitment for LNG supply.
“We have imported it at $11.5 per million British thermal units (mmbtu), a cost that includes transportation charges, margins, 17% General Sales Tax (GST) and even losses of gas utilities,” he said, adding that its price was linked at almost 14% of Brent oil. This means that a unit change in the price of Brent oil will result in an effective change of around 14% in the price of LNG. The Economic Coordination Committee has already decided to regulate the price of LNG every month – a pattern followed by other petroleum products in the country.
Meanwhile, Abbasi said that Port Qasim Authority (PQA) was due to conduct a study that should be acceptable to the Qatar’s shipping industry.
The minister said LNG remained a cheaper source of fuel. “On April 27, the delivered price of fuel to power plants in northern Pakistan on an equivalent basis was $11.5 per mmbtu for LNG, $12.6 for HSFO, $13.8 for LSFO and $22 per for diesel,” he added.
He said Pakistan had imported two ships of LNG at a price less of than $8 per mmbtu.
Stressing the importance of the fuel, Abbasi said that Pakistan would save $1 billion every year by utilising LNG when compared to costs incurred through the use of furnace oil and diesel in running power plants.
He said that work on the second terminal was under way and the Sui Southern Gas Company’s (SSGC) board would make a decision in this regard on May 15.
“Pakistan is the only country using diesel to run power plants by importing it from Kuwait,” he said, stressing that even Kuwait was not using diesel to run power plants.
He maintained that the 3,600MW LNG based power plants in Punjab would not have the option to use diesel. “The consultant has recommended installing dual-fuel plants but I have opposed this,” Abbasi said. “Stoppage of LNG supply is a rare phenomenon,” he said.
Responding to a question about terming LNG as a petroleum product, he said that gas had always been a petroleum product. He said that third-party access rules had been amended to facilitate the private sector. “There is nothing barring the private sector in LNG import,” he said.
Published in The Express Tribune, May 1st, 2015.
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