LNG imported at $8 per mmbtu, says Khaqan

Published March 31, 2015
“This is the best negotiated deal of the present government,” the minister told a news conference. -Reuters/File
“This is the best negotiated deal of the present government,” the minister told a news conference. -Reuters/File

ISLAMABAD: After a long silence on the issue of LNG price, Minister for Petroleum Shahid Khaqan Abbasi disclosed on Monday that the first shipment of liquefied natural gas reached Karachi from Qatar at the rate of $8 per million British thermal units (mmbtu).

“This is the best negotiated deal of the present government,” the minister told a news conference while answering questions about the negotiated price of the deal.

Mr Abbasi said the first cargo was imported by the private sector, but letters of credit (LCs) for the import were opened by the state-owned Pakistan State Oil. “Don’t go into the form of the deal, but look at the outcome that LNG reached Karachi ahead of the schedule time,” he insisted.

The minister said two cargoes of LNG would be imported in mid-April. “We will receive four shipments by November 2015”, he added.

Defending the source of LNG, the minister said the choice of Qatar was based on two factors: uninterrupted efficient supply of LNG and competitive price because of lesser transportation cost. He also mentioned that India was importing LNG from Qatar since 2003.

The minister said that a high-level delegation will negotiate the price with the Qatar authorities in the first week of April.

“We are expecting to reach an agreement on price that was suggested by international experts,” the minister said, adding that it would be premature to disclose the expected price at present.

However, the minister hinted that the price would be lower than that being charged from other countries.

Mr Abbasi explained that the import of LNG will be on the basis of long-term agreement and not spot purchasing. The difference between the two deals will not only be in price, but also timely availability. The spot deals, he said, sometimes provided lower price but they might not ensure regular supply.

“We have also offers from India to export LNG,” the minister said. Moreover, India was offering higher price because of fixed charges like transportation, he said. This also included an investment of $300 million on pipeline from Jalandhar in India to Wagha in Pakistan. “We are still working on the proposal.”

In the last eight years, several attempts were made for LNG imports but to no avail.

“This (importing LNG) is the only efficient source to mitigate the energy problem in the short run as the gas-pipeline projects will take time to become functional,” Mr Abbasi said, referring to Iran-Pakistan, and Turkmenistan-Afghanistan-India-Pakistan (TAPI) gas pipeline projects.

Pakistan generates electricity through furnace oil and diesel, and both fuels are relatively expensive as compared to LNG, the minister said, adding, “LNG is also cleaner and considered as environment-friendly.”

The LNG import would help the country raise power production by 10 per cent, besides annual savings of $300 million to the generating companies, he said. “We can produce electricity at Rs10 per unit against Rs18 to Rs20 per unit on furnace oil.”

The minister ruled out the increase in the price of gas for domestic consumers, power producers and fertilisers sector. However, there may be “minimal increase”, the minister said, adding that the industrial sector would take the brunt of the price hike.

The minister added that the government had also set a competitive regime for the CNG sector to get benefit from LNG imports.

To a question, the minister said Sindh’s issues would be taken up in the inter-provincial coordination committee meeting on Tuesday.

Published in Dawn, March 31st, 2015

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