Negotiations between Pakistan and Qatar over import of the much-hyped liquefied natural gas (LNG) – that was to be done on a government-to-government basis – have hit a snag over delays in finalising the mode of payment and issuance of standby letter of credit (SBLC) by independent power producers (IPPs).
At present, Pakistan State Oil (PSO) is importing LNG through spot purchases after failing to finalise the government-to-government LNG trade deal with Qatar.
Officials familiar with the development said the issue was raised in a meeting held at the Prime Minister House.
They added that Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi informed the meeting that arrangements for LNG supply had been made. However, he added, negotiations with Qatargas were held up due to unresolved issues of the mode of payment and issuance of SBLC.
He said that the LNG contract was not moving forward due to these issues that are to be resolved by IPPs and the finance division. He said that the power sector could utilise gas to fill the gap, offering to divert the unutilised fuel from out of LNG delivery to four IPPs in Lahore, Kapco and Fauji Kabirwala.
During the meeting, Finance Secretary Dr Waqar Masood was directed to resolve the mode of payments, while Minister for Water and Power Khawaja Asif was told to settle the SBLC issue.
The petroleum minister requested the committee to facilitate and speed up the process of determining the price of LNG-based gas. He informed that the price formula had been worked out by the regulator, the Oil and Gas Regulatory Authority (Ogra), but the government first needed to categorise LNG as a petroleum product.
The secretary for water and power apprised the meeting that all activities regarding the implementation of LNG-based power projects were on track.
Meanwhile, when contacted, Petroleum Minister Abbasi said the payment mechanism was being finalised. “The power sector has not yet provided guarantees for LNG payments, but we are close,” he added.
According to officials, all arrangements with Qatar had been finalised except the payment mechanism and this is proving to be a thorn in taking the agreement forward. Qatar wants the Pakistan government to ensure the payment mechanism, especially given the country’s circular debt issue that has plagued the power sector.
Published in The Express Tribune, June 12th, 2015.
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