THERE is no going back on the gas deal with Qatar. Therefore, the delay in its ratification by the Economic Coordination Committee is unfortunate and reflects confusion within the economic team regarding key issues in the absence of an integrated energy ministry.

But Petroleum Minister Shahid Khaqan Abbasi is optimistic. “I believe the ECC will clear the long-term contract for the import of LNG from Qatar in its next meeting as the law committee (tasked with vetting the draft) has cleared the summary,” he told Dawn over phone from Islamabad.

Commenting on the need and urgency of the ECC’s approval, he added: “We have 2,000MW worth of highly efficient power plants that require a steady supply of gas. Three fertiliser companies are dependent on gas, along with numerous captive power plants of textile, glass and other manufacturing units, construction sites, shopping malls etc.

“Some big users, such as fertiliser companies, have been importing directly since March, but the private sector generally prefers to buy from the government. The Qatar deal will ensure dependable supply of gas for the next 10 years.”

Abbasi said while the LNG import deal is technically between two commercial entities, the fact that it involved a long-term commitment and that the process was initiated after a government-to-government understanding necessitated the ECC’s involvement and approval.

“PSO acts on its own for short-term LNG import tenders, but the Qatar deal is different. I explained this in the last ECC meeting but am ready to do it again,” he said.

The expected contract between the importer, PSO, and the exporter, Qatar Gas, is for 1.5m metric tonnes per annum (MTPA), which will increase to 3m MTPA in three years. The petroleum ministry did not disclose the rate and other details about the deal, which, it said, would be shared after the agreement was sealed.

PSO has committed to providing RLNG at a contract price that will be competitive with the gas rates expected from the Tapi and the Iran gas pipelines

An insider disclosed that the ministry needed to involve the Cabinet to provide cover to a negotiated deal as opposed to one reached through open bidding. While this does not necessarily mean that the ministry did something wrong, it is clear evidence that the current legal framework lacks flexibility for pragmatic solutions.

Speaking to Dawn in an exclusive briefing in Islamabad, Abbasi termed the LNG import deal ‘a game changer’ and something on which ‘Pakistan energy future depends in the short run’.

Natural gas occupies over 50pc share in the country’s energy mix, along with hydro, oil, nuclear and renewable. The depleting stocks at Sui kept gas production stagnant at 4,000m cubic feet per day (mmcfd) for the last 10 years. According to a petroleum ministry document, “Pakistan’s constrained demand for natural gas is 6,000 mmcfd, whereas the unconstrained current demand is 8,000 mmcfd — more than double the current level of production”.

After being on the ECC’s agenda for about two months, it was during the last meeting, the gas deal’s summary was reverted to a legal committee for vetting again in light of issues related to the jurisdiction of varied organisations involved in the import, handling, re-gasification, transportation and distribution of the new commodity.

It is interesting to note that re-gasified liquefied natural gas (RLNG) has been classified as a ‘petroleum product’ to allow the PSO to negotiate the import of gas with the overseas supplier.

The public oil company has committed to providing RLNG at a contract price that will be competitive with the gas rates expected from the Turkmenistan, Afghanistan, Pakistan and India (Tapi) and the Iran gas pipelines. PSO is ordained to deal exclusively in petroleum products under the law.

“This is what happens when different departments work at cross purposes. Despite tall talk on the energy sector, multiple ministries and departments are controlling petroleum, natural gas, hydro, nuclear and alternative sources,” commented an oil expert.

“They commission studies and ask for advisory notes but hardly ever apply them,” said a bitter retired executive of an oil marketing company.

“It is naïve to test the patience of a trade partner after negotiations that have spanned 18 long months. They need to understand that the supplier, Qatar Gas, can also back out,” he added.

Commenting on the reason for the delay, a senior source in the ministry blamed the ‘cash-rich oil mafia’.

“There is a powerful lobby that is opposed to the idea of LNG imports. It spends liberally to promote and protect its interest,” he said, implying that questions about the LNG policy in the media were being planted.

“The government needs to put its own house in order instead of pinning the blame on others. I know for a fact that 15 years back, representatives of at least one oil company made several rounds of Islamabad to plead the case for LNG imports,” an market watcher commented.

“The government enjoys about 60pc share in the country’s energy trade. So if an ‘oil mafia’ does exist, the petroleum minister must be its kingpin,” a analyst retorted.

Published in Dawn, Business & Finance weekly, December 21st, 2015