ISLAMABAD: With the declining international market, Qatar has also scaled down its price offer to $14 per Million British Thermal Units (MMBTU) for sale of liquefied natural gas (LNG) to Pakistan from its earlier bid for $18 — a reduction of about 22 per cent.

The LNG prices have plummeted to around $10 per MMBTU in the spot market, but the government would be able to directly benefit spot price due to Public Procurement Rules, managing director of the Sui Southern Gas Company Limited (SSGCL) Shoaib Warsi said on Friday.

Talking to journalists here, the SSGC MD said Pakistan was also in talks with Petronas of Malaysia for LNG import and would be able to strike a competitive price deal with either Qatargas or Petronas.

The government is trying to conclude a government-to-government deal with Qatar or Malaysia to bypass competitive bidding that involves much longer time and legal hitches because of volatile markets.

He said the open LNG market, according to independent consultants, was projected to fall further down to $6-7 and was expected to remain in the same price zone for about seven to eight years. Hence, it would be opportune time for Pakistan to enter the LNG market and benefit from lower prices.

Mr Warsi said that the government had constituted a price negotiation committee (PNC) to negotiate LNG price with Qatargas and Petronas.

The terms and conditions of the agreement are being finalised.

He said that the LNG seller and price was expected to be finalised in December this year.

He said the USAID Consultant has recommended short-term LNG import deal for two years to take further benefit from price cut in the global market.

He said the USAID consultant had also said that LNG price in global market may come down to $6 per MMBTU in few years.

On the other hand, he said Qatar wanted to have a long-term contract to secure a better price on a sustained basis following cut in prices.

He maintained that the government was following a two-pronged policy to import LNG which included government-to-government basis and may also consider some short-term purchases through spot purchases as well to have competitive blend of two prices.

He said that USAID consultant had also advised that declining trend in LNG prices in the world market would continue for coming five to six years.

“We should install power plants to operate on imported LNG during this period,” he said, adding that replacement of LNG fuel in power plants would result in cutting fuel cost by at least 17pc compared to furnace oil.

He maintained that the government had decided not to pursue weighted average policy of gas prices after LNG imports and planned to use imported LNG in power sector to secure the other consumers from the rising trends in prices.

He said that the government had also decided to provide LNG to most efficient power plants.

“Gas utilities — SSGCL and SNGPL — would also lay transmission line with 42-inch diametre to transport imported LNG from Karachi to Lahore,” he said.

He added that the Engro was setting up LNG terminal and now offered that it could handle 600 million cubic feet per day (mmcfd) LNG. He said that the gas companies would pick 400mmcfd whereas it would sell 200mmcfd directly to its own clients,” he said, adding that the SSGC had also floated tender for another terminal to handle 400mmcfd LNG to overcome energy crisis in the country.

He also said that three other parties, including JJVL, Global Energy of Turkey and Bahria were also working to set up LNG terminals at Karachi.

“These private entities would be better placed to import LNG through spot purchases at lower rates,” he added.

He said that the government also planned to regulate LPG prices and after this, LPG auto stations would be set up across the country to meet the demand of auto sector.

Published in Dawn, November 15th, 2014