Reservations over LNG deal with Qatar

Published January 23, 2015
— Reuters/file
— Reuters/file

ISLAMABAD: Petroleum ministry officials are keeping their fingers crossed over the final agreement for the import of liquefied natural gas (LNG) from Qatar. Shahid Khaqan Abbasi, the federal minister for natural gas and petroleum, is in Doha to negotiate a deal with the Qatari government.

Arshad Abbasi, who works as energy expert with the Sustainable Development Policy Institute (SDPI), an independent think tank, has argued that in its current form the deal with Qatar would be of no good to the country.

Read: LNG import agreement signed with Qatar

Mr Abbasi has noted down his concerns in a letter addressed to Prime Minister Nawaz Sharif.

In meetings held over recent weeks, top petroleum ministry officials have expressed their concerns over the government’s intended price, $14.5 per MMBTU, to import gas from Qatar, because with record fall of oil prices in the world, LNG is available in the international market at $9.5 per MMBTU. And there are predictions that LNG’s price is likely to tumble further in coming years. The ministry officials also objected to the length of the agreement — 15 years — and proposed bringing it down as much as possible.

Also read: PTI finds fault with deal for LNG import from Qatar

“Yes, these issues were raised and the petroleum minister in response assured us that all efforts would be made to bring the quoted price down,” a senior government official at the Prime Minister’s Office told Dawn. “We are hoping the minister comes back with the best deal for the country.”

As per the initial agreement, the price of LNG was to be directly linked with the international oil prices. However, with the steep decline in crude oil prices all over the world, now a new accord has been prepared to delink LGN price tag from oil price, which the minister is discreetly pursuing.

Also read: Qatar cuts its offer for LNG to $14 per MMBTU

“In that case it remains to be seen how the petroleum minister is going to make the Qatari government ready for a reasonable deal,” said the government official. The government has set March 31 as deadline for the import of LNG from Qatar.

The government is so keen on importing LNG from Qatar that the new managing director of PSO, Shahid Islam, just after a couple of days of his appointment right in the middle of oil crisis, was dispatched to Doha on Monday. The petroleum minister also joined him on Thursday.

With the LNG import deal again in the spotlight, quarters concerned have started expressing concern as to how the agreement could be in the best interest of the country.

Also read: PM directs ministries to improve coordination for smooth petrol supply

Arshad Abbasi of the SDPI in his letter to the prime minister said: “LNG deal is almost following the footprint of the agreement signed between the government and independent power producers (IPPs) in early nineties. When you (PM Nawaz Sharif) came to power in 1997, your government tried its best to reverse it, but when one company, HUBCO, approached the International Court of Arbitration in the case.” If India is going to import LNG from Qatar at the rate of $10.50 MMBTU, Pakistan should try to secure a lower price, added Mr Abbasi.

He is also against using LNG for power plants. In the letter Mr Abbasi explained how efficiency of plants, which was already at a dismal 40 per cent, would further come down after the proposed switchover to gas.

Nadeemul Haq, the former deputy chairman of Planning Commission, echoed the concerns raised by Mr Abbasi, saying: “I’m totally against the government getting involved in the buying of LNG. This should be left to the private sector.”

Mr Haq, who had served under the PPP government, said that he had the same argument with the then adviser on petroleum and natural gas, Dr Asim Hussain, that in case the government got involved in the import of LNG, the country would suffer in the same way as it did at the hands of IPPs.

Another senior government official said the best option for the government was to go for spot buying from the open market at much cheaper price than the rate proposed in negotiations with Qatar. However, there is a counter argument: If the deal is locked at a good rate with the Qatar government, it will be good in the long term.

Some experts, both within the government and outside, are of the view that the current crisis was deliberately created to pave the way for a deal on import of LNG.

Back in 2010, the Supreme Court had cancelled an LNG deal, finding it not favourable to the country. Therefore, it wouldn’t be easy for the PML-N government to go for an expensive deal, said a government official.

Published in Dawn, January 23rd, 2015

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