In a sharply worded piece of writing, as well as at a news conference, the petroleum and natural resources minister has sought to clarify his position on the chaotic opening of Pakistan’s first LNG import terminal.

It has been a month since the last LNG vessel docked at the new import terminal, and since then confusion has shrouded the project on many fronts, including pricing disputes and sharing of responsibility to make payments.

The minister’s response has clarified a few issues certainly, but it is important to note that those issues were never the ones in contention.

Read: Power sector blamed for snags in LNG import

For instance, he devotes significant space to trying to establish that LNG imports are the most preferred option for Pakistan in the immediate term to bridge growing deficits due to dwindling supplies of domestic gas.

This point is not seriously contested, and does not need to be clarified at such length. He also points out that his government has successfully erected an LNG import terminal “in record time” primarily because they used an “unbundled approach” that separated the terminal operator from the purchaser.

This is true, although it still needs to be explained why gas has not flowed through this terminal in almost a month now.

Also read: Gas company chief ordered to sign LNG deal or pack up

On that point, the minister blames his colleagues in the water and power ministry, who, he argues, have failed to place orders for further consignments for their power plants.

Hopefully, this doesn’t signal the beginning of a blame game between ministers, which would be an embarrassing sight.

But more importantly, if it’s true that the minister is having a hard time finding parties to place spot market orders for LNG, the one big weakness of the “unbundled approach” stands exposed.

Also read: LNG muddle persists

At the core of the problem that has the minister so visibly frustrated is the enormous price difference between imported LNG and domestic gas.

Power plants find furnace oil to be a cheaper option at the moment, and there is little hope that fertiliser plants would be interested in using LNG as a substitute for the heavily subsidised domestic gas they receive.

Clearly, the government will need to be the buyer at the moment and mix the imported LNG with pipeline gas and let the final gas tariff for all stakeholders reflect the incremental cost. The sad part of the story is that the homework necessary to make this arrangement work was not done before the terminal started commercial operations.

Published in Dawn, May 3rd, 2015

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