LNG deal with Qatar possible if payment mechanism finalised

ISLAMABAD: The top mandarins of ministry of petroleum and natural resources (MoPNR) and ministry of water and power (MoWP) on Wednesday held two rounds of talks for evolving the smooth payment mechanism and opening of standby letter of credit (SBLC) to qualify for LNG deal with Qatar. The ministry of water and power is vigorously working to resolve the issues, a senior official who attended the meeting told The News.
Prime Minister Nawaz Sharif has asked the concerned ministries to resolve these issues before the arrival of the high-powered delegation from Qatar, due on August 24. The delegation headed by Qatargas managing director is most likely to finalise the LNG deal and the agreement is possible only if the said issues get resolved otherwise the deal will get further delayed. Already four months have been wasted just because of the failure in evolving the payment mechanism to Qatar for the LNG, which will be used by power sector.
The prime minister has directed the ministry of water and power to ensure the payment of amount within one week to Qatargas Company after the LNG ship anchors at the LNG terminal. He will inaugurate the LNG terminal of Engro on August 28, and wants to get the LNG deal signed during the visit of the high-powered delegation from Qatar. “We are hoping that ministry of water and power might arrange some $300 million which will have to be paid within one week of the LNG carrier’s arrival. The payment will be arranged under ring fencing arrangement,” the official said.
Shahid Khaqan Abbasi has confirmed that the delegation from Qatar is due on August 24 and added that the success of the visit depends upon the response of the power sector with regard to smooth payment mechanism and opening of stand by letter of credit.
The minister said that LNG deal will be signed for 15 years time and after ten years the price of LNG will be renegotiated. The deal will have no ‘S’ curve, as it will expose many officials to NAB proceedings.
When asked if Qatargas company is willing to allow its LNG ship - Q-flex to navigate in the water channel of Port Qasim which is 13 meters deep while international standards say the draft should be of 14 meters, the minister said that small LNG ships will be used to bring LNG, as Qatargas company possess a fleet of small LNG ships.
To a question he said that policy guidelines on LNG price regulation have been sent to Oil and Gas Regulatory Authority. The official who is privy to the development said that Ogra has asked PSO to provide the invoices of every ship and other information. Ogra will also fix the margin of PSO on LNG import. As Ogra has not notified the re-gasified LNG therefore Nepra is also unable to determine the tariff of electricity units that are produced after RLNG is used as fuel in power plants.
PSO has imported LNG worth Rs30 billion, but the state-owned oil marketing company has failed to recover Rs27 billion of RLNG mainly used by power sector. This has exposed PSO to another kind of circular debt only because of non-payment on RLNG by the power sector. “In this scenario, LNG deal with Qatar is impossible, the petroleum minister said.