$900m guarantees for LNG likely

October 02, 2012

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ISLAMABAD, Oct 1: With Pakistan negotiating Liquefied Natural Gas (LNG) purchases from the United States, the Economic Coordination Committee (ECC) of the cabinet is expected to clear on Tuesday about $900 million rolling guarantees for the LNG import and dedicate its supplies mostly to the power sector without increasing gas tariff for other sectors.

The ECC meeting will be presided over by Finance Minister Dr Abdul Hafeez Shaikh.

Dr Asim Hussain, prime minister’s adviser on petroleum and natural resources, told Dawn on Monday that negotiations were currently in progress with two international firms to purchase LNG from its sources in the United States at the Henry Hub prices that are currently much lower than the Middle East and European markets because of LNG glut in North American region.

He declined to disclose the names and details of the proposed deals with international firms, saying these would be known to all in due course.

Henry Hub is a Louisiana based gas distribution systems whose pricing mechanism is linked to New York Merchantile Exchange and Intercontinental Exchange.

An official said the LNG prices in the US were more than one third of the prices in the Middle East region but its thousands of kilometres of transportation through specialised vessels would be challenge and perhaps too ambitious a plan.

Pakistan’s plans to import LNG from Qatar, some African countries and other sources being pushed by the government for more almost five years now have achieved little progress on ground because of judicial intervention, a lack of clear cut policy and continuous and huge stock of energy sector circular debt despite extreme gas and electricity shortages.

With such challenges in mind, the a sub-committee of the ECC has already approved broad contours of an LNG import plan envisaging both short and long term imports , likely to be approved by the ECC. The sub committee comprised prime minister’s adviser on petroleum Dr Asim Hussain, secretaries of finance, law and petroleum, governor state bank of Pakistan, chairman board of investment and member energy planning commission.