Business

Unresolved issues: LNG negotiations with Qatar hit a snag

Import of fuel on government-to-government basis continues to be held up

Zafar Bhutta June 12, 2015

Import of fuel on government-to-government basis continues to be held up. PHOTO: REUTERS

ISLAMABAD:

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 12^th, 2015.

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COMMENTS (8)

Love Pakistan | 8 years ago | Reply @Blithe: This has nothing to do with the banks. The root cause is systemic corruption in every project that is embarked upon by the ruling party. LNG is the mother of all the scams that have taken place in Pakistan so far. Shahid Khaqan Abbasi must be SACKED immediately ! ! ! On the banking front this govt has borrowed billions upon billions (Amassed Record Debit in Nation's History) and the repercussion would be felt in few years time, when the principal + interest is due.

unbelievable | 8 years ago | Reply If you have the money you can buy almost anything ... certainly LNG which is a common commodity sold throughout the World. Blow through the smoke and you always disclose the same issue .. no money , no credit . no LNG.

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Blithe | 8 years ago | Reply @Moin R Siddiqui: This has more to do with international banks not having the appetite to confirm the huge LCs . With the improvement of the credit rating in the country , it is expected that international banks will have more appetite. However , Mr. Imran Khan Niazii's brand if steet politics really put off international banks from increasing their country limits and capital for Pakistan.

Dr Waqar Siddiqui | 8 years ago | Reply Shahid Khaqan Abbasi should be terminated immediately by the Supreme Court of Pakistan, since he is the front man of PM on all big-ticket petroleum & related scams. PM naturally would not dare interfering in Shahid's dubious commercial affairs, as his high fortunes are at stake !

Afzal Siddiqui | 8 years ago | Reply Shahid Khaqan Abbasi maintains the worst reputation of all Cabinet ministers, particularly for technical incompetence and poor leader capabilities. He is viewed as a heavy burden to bear by his party colleagues. They just want to get rid of his ASAP. Surprised why PM is not taking notice. May be the PM himself is the driving force behind this LNG / many other high networth scams underway in Pakistan.

Moin R Siddiqui | 8 years ago | Reply @Nauman Hussain: You are right on it. Shahid Khaqan Abbasi must resign. This man has no leadership skills and/or qualities. He is basically a dummy of PML-N's senior leadership. I bet he is in the midst of swindling billions out of this LNG scam. ITS A MASSIVE SCAM. Someone from Pakistan Embassy in Qatar mentioned the other day to me that PML-N High Ups were also involved in this biggest ever fraud (in-the-making) in Pakistan's history.

Nauman Hussain | 8 years ago | Reply With sure certainty and in good faith I say the LNG importation deal with Qatar and in the future even with suppliers far beyond Middle East region could come to fruition - with all the nitty gritties in-place and properly sorted out for the system to work efficiently and effectively. However for this to occur their is a major prerequisite which first needs to be fulfilled - Minister for Petroleum Mr Shahid Khaqan Abbasi should either RESIGN from his post voluntarily or alternatively be immediately SACKED from office by the Prime Minister. Mr Shahid K Abbasi - motivated by his personal gains is the primary obsticle hindering the entire LNG importation process. The reason is straight forward. He intends to make billions out of this deal. He subtly *favoured Akbar Associates for construction of second LNG terminal and directed SSGC to do so.* The same Company recently hit the headlines when it was uncovered by SSGC that a BOGUS / COUNTERFEIT cheque drawn on fraudulent Buraj Bank account worth Rs 7 BILLION was submitted to SSGC as Bond-money for Award of Contract by Akbar Associated. Further investigation revealed same company was closely connected to Shahid Khaqan Abbasi and few others in party leadership. Given all of this I think Mr Abbasi has no credible reason (s) to hold the Office any longer. He should himself resign at the earliest and leave politics once and forever.

sehr.siddiqui | 8 years ago | Reply Settle the payment with Saif ur Rehman and things will be fine. Earlier the better.

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