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A welcome offer: LNG import cost

March 13, 2013

QATAR’S offer to annually supply two million tons of liquefied natural gas at a discounted price raises hopes of Pakistan overcoming its gas shortages — albeit only to some extent — in the near term. Islamabad had signed an MoU with Doha some time ago for importing LNG, but the plan did not materialise due to pricing issues. Now, says the government, the Gulf state has agreed to substantially cut its earlier price demand of $18 per mmbtu. The government has not disclosed the new price, but some reports suggest it is in the range of $14 to $15 per mmbtu, 16 to 22 per cent lower than the previously quoted rate. The gas will be supplied on a government-to-government contract basis in line with the recommendations of a private sector-led energy committee last year. The exclusion of private contractors from the deal should help the government move more quickly towards the early implementation of the project.

The rapid completion of the LNG import project is important not only to keep gas shortages for the power and industrial sectors to a minimum in the summer but also in view of the delays in the implementation of the two LNG import projects of 400mmcfd a day, each through the award of contracts to the private sector. The first project has been stalled because of minor violations of public procurement rules. Any further action on this project has been stopped by the Supreme Court, which took suo motu notice on the basis of some media reports. In the past, the government had to scrap a similar project because of the intervention of the court. It is hoped that the court will decide the matter at the earliest in the larger interest of the country’s sliding economy. The materialisation of Doha’s offer will add only about 300mmcfd gas a day to the network of the two public utilities facing shortages of over 1000mmcfd, and the country will be resigned to gas scarcity unless the stalled private- sector LNG import projects are also implemented.