ISLAMABAD: Petroleum Minister Shahid Khaqan Abbasi on Thursday blamed the power sector, including the Water and Power Ministry, for troubles being faced in streamlining the import of liquefied natural gas (LNG) despite potential $1 billion savings annually.

“If the power ministry is unwilling to have LNG supply, we have many private sector consumers who are ready to consume more than 600 million cubic feet per day (mmcfd),” he said at a press conference, and named captive power plants, compressed natural gas industry, fertiliser and even housing societies who were requesting LNG supplies.

He said the proper arrangement for LNG shipments, gas sales and purchase agreement and pricing had been hampered by three major irritants that were also condition precedent to formally strike a deal with Qatar.

“Please resolve your issues and start utilising LNG,” he said, adding that the ministries of finance and power were required to put in place payment mechanism for LNG supply chain, but this had not been done. As a result, the commercial agreement with Qatargas could not be inked.

He said the mechanism could not be possible despite approval by Cabinet Committee on Energy presided over by the prime minister.

Other obstacles included absence of standby letters of credit (SBLCs) by the independent power plants (IPPS) and resolution of port issues by the Port Qasim Authority (PQA), he said.

“Refusal of IPPs to give letter of credit, port study and payment mechanism are three major issues which are to be resolved to import LNG from Qatar,” he said.

He said there had been 82 issues in LNG import and now only three issues were left to be resolved. Pakistan and Qatar, he said, had signed master sale agreement but it was not a commitment for LNG supply.

“We have imported LNG at $11.50 per million British thermal units (mmbtu) which includes transportation charges, margins, 17 per cent General Sales Tax (GST) and even gas utilities losses,” he said, adding that price was linked at almost 14pc of Brent oil.

He said the PQA was required to conduct a study which should be acceptable to shipping industry of Qatar. The last condition precedent his ministry was required to deliver was a tripartite agreement among Pakistan State Oil and two gas utilities which they have signed after addressing their internal difference of opinions, he added.

Mr Abbasi said that Pakistan had imported two ships of LNG at a price of less than $8 per mmbtu. The Q-Flex ship carrying the super-chilled fuel from Qatar could be berthed without dredging of water channel but with partial filling because Qatar did not have smaller ships.

“A delegation from Qatar will reach Pakistan on May 6 to assess terminal for handling of ships,” he said, adding that Pakistan would save $1 billion every year by using LNG compared to furnace oil and diesel.

He said that work on second terminal was underway and the board of directors of Sui Southern Gas Company (SSGC) would take a decision in this regard on May 15. He said that three companies, including Engro, Akbar Associates and Pakistan Gas Port Limited, had participated.

The minister said Pakistan was financing power generation of Kuwait. “Pakistan is the only country which is using diesel to run power plants by importing it from Kuwait while Kuwait was importing LNG at half its price to run its power plants instead of diesel,” he said, adding that Pakistan had no other option except running power plants on diesel, which is the most expensive fuel.

He maintained that 3,600MW LNG-based power plants in Punjab would not have option of alternate fuel of diesel on his demand. “The consultants had recommended installing dual-fuel plants but I have opposed this. It is better to shut down power plants rather than operating on diesel.”

Responding to question about describing LNG as petroleum product, he said that gas had always been a petroleum product and that is why the name of his ministry was petroleum and natural resources.

Published in Dawn, May 1st, 2015

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