Oil mafia tried to bribe me on LNG: minister

September 16, 2015

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Shahid Khaqan Abbasi claimed to have received threats as well as offers of financial rewards from oil mafia.—AFP/File
Shahid Khaqan Abbasi claimed to have received threats as well as offers of financial rewards from oil mafia.—AFP/File

ISLAMABAD: Confirming that there were two major irritants on the part of the government that hampered a long-term supply contract with Qatar for liquefied natural gas (LNG), Petroleum Minister Shahid Khaqan Abbasi claimed to have received threats as well as offers of financial rewards from oil mafia in exchange for giving up on the LNG project.

Speaking at a press conference – his second in as many days – the minister criticised PTI chief Imran Khan for issuing “irresponsible statements unbecoming of a national leader” regarding Qatar and said that Pakistan was receiving messages asking that the country not be brought into disrepute, irrespective of whether or not the government was interested in the LNG purchases.

Also read-Editorial: Gas shortages

“There is an oil mafia... I was lured and intimidated not to work on the LNG terminal,” said the minister, adding that he was offered monetary benefits in exchange for signing some summaries that were brought before him. Asked why, being a federal minister, he did not expose such people, he said he preferred to deliver instead of wasting time.

The minister said he had held a meeting with Saeed Mehdi, chairman of the Sui Northern Gas Pipelines (SNGPL) board of directors, and had asked him to take care of the board and the company’s management, which could not deliver on LNG import.

He said that SNGPL’s system losses on the distribution network were more than 20 per cent, but the management put its average losses at around 11c.

Mr Abbasi said the government was in negotiations with Qatar Gas for a long-term LNG sale-purchase agreement for 15 years, but it was being hampered by two major impediments.

Firstly, he said, the ministries of petroleum, finance and power were required to finalise a payment mechanism for LNG import. “We have not been able to do this as of today,” he said.

Secondly, he said, the government was required to ensure standby letters of credit payable to Qatar Gas, while similar SBLCs were to be issued by independent power producers (IPPs) under the gas-supply agreement. He said this had also not been done thus far because LNG tariffs had not been determined by the Oil and Gas Regulatory Authority (Ogra).

He said that on the basis of tariff determination, PSO would be authorised to notify LNG rates every month based on the value of the previous month’s cargo, as was the case with petroleum pricing.

Mr Abbasi said that over the past 10 years, three governments had made five attempts to import LNG and failed, but the current government had succeeded in importing the gas within 20 months, which was a boon given that domestic gas reserves were fast-depleting and all sectors such as fertiliser, electricity, transport and others were suffering.

He said the PML-N government was able to run 600MW power plants on LNG this year, which had been closed last year. He claimed that at any price, LNG would provide an annual $1billion in savings. He said the price of LNG was less than that of the gas which would be obtained from the proposed Iranian and Turkmenistan pipelines.

He said the petroleum ministry had anticipated teething problems at the outset and hence committed only 200MMcfd of LNG for first year under the terminal agreement with Engro, saying that otherwise, the terminal had the capacity to process 600 million cubic feet per day. He said that despite a number of problems, LNG imports were only half a ship behind the committed schedule. Eleven ships had been brought thus far and 13 more were expected during the remaining six months ending in March 2016.

He said the terminal charges secured in Pakistan were the lowest among 40 or so similar terminals operating across the globe. He also said that the terminal contract was not changed after the bidding process as was the case with many past agreements.

He said the additional LNG imports would ensure that three 3,600MW power plants would be operational in the summer of 2017. He said these plants would have the highest-guaranteed efficiency of 52.5pc, the most secured in Pakistan.

The minister conceded that port charges for LNG were quite high as some cargos were charged at $1 million and others at $700,000, compared to the $100,000 being charged to oil cargos. He said that LNG suppliers had previously demanded a $750m guarantee, which had now been reduced to $50m, or the equivalent of two shiploads of LNG, because of the government’s good reputation.

The minister said the government could secure cheaper LNG through negotiations but was constrained by procurement rules that required bidding, which had peculiar problems with such a product.

Published in Dawn, September 16th, 2015

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