No change in LNG deal with Qatar: adviser

December 06, 2019

ISLAMABAD: Pakistan will not seek any alternation in LNG import deal with Qatar, leading to any reduction in import of the product rather it will continue to be committed with the existing...

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ISLAMABAD: Pakistan will not seek any alternation in LNG import deal with Qatar, leading to any reduction in import of the product rather it will continue to be committed with the existing agreement.

However, the government is pondering to import additional LNG from Qatar and to this effect prime minister has asked Adviser to Prime Minister on Petroleum Nadeem Babar to remain in dialogue with Qatar for win-win deal.

One of the top officials at Petroleum Division says that the government wants to ensure the availability of LNG with stability in the years to come. While briefing on the LNG situation in the weekly meeting with Prime Minister Imran Khan, the official quoted Nadeem Babar as saying that in the last 24 months, the cost of spot purchasing of LNG varied from 9 percent to 16 percent of the Brent.

The projection of last two to three decades shows that in next year the cost of spot buying of LNG would surge manifold so keeping in view the said projections and erratic behaviour of LNG cost in open market, the government wants to lock the LNG price close to the existing cost of spot buying which will be a win-win situation for both Pakistan and Qatar.

It is pertinent to mention that Pakistan LNG Limited (PLL) earlier refused to open the long term tenders for import of LNG for 10 years, saying the country does not need more LNG based on input of Sui Northern. And it may not be out of place to mention that Qatar earlier in the month of June, 2019 offered additional LNG of 200 mmcfd at 11.05 percent of the Brent, 20 percent below from the price of 13.37 percent of Brent under which at present Doha is supplying 500 mmcfd to Pakistan under 15 years agreement. Under 15 year agreement, after 10 years, LNG price can be reviewed.

Qatar that offered 200 mmcfd additional LNG at 11.05 percent of Brent got annoyed when Pakistan cabinet decided to float tenders for import of LNG for 10 years with an aim to know the reference price prior to entering new LNG deal with Qatar. This had annoyed authorities in Qatar a lot as they were of the view that they offered the new price at very lower side in the interest of Pakistan and in the tenders the trading companies that lift the LNG from Qatar mostly will submit their tenders. Qatar says as a country it never gets involved in the tenders. Since PLL had refused to open the tenders, saying that the country does not need more LNG, keeping in view to the input of Sui Northern. However, the authorities in Petroleum Division are of the view that if new LNG deal with Qatar at lower price close to existing spot purchasing prices is not locked then Pakistan will have to attain LNG from open market under spot purchasing when after one year the LNG price would surge manifold in the open market.

When contacted Adviser to PM on Petroleum Nadeem Babar confirmed saying that there will be no change in the existing LNG deal, and no dialogue will be initiated for reduction in import volume of LNG rather Pakistan will continue to be committed with the existing LNG deal. However, he said that the government got reduced the volume of LNG in the ships, in the month of November and December which usually carries 1,40,000 cubic meters LNG owing to which in the month of January, the LNG cargoes from Qatar will increase to 10 in numbers and there is no reduction in LNG import volume. “We factually got reduced the LNG volume in the LNG vessels from Qatar in November and December under temporary arrangement because of low consumption by power sector which will be compensated in next month of January.”

He said from December 15 because of canal closure, the hydro generation will touch lowest ebb and power sector will increase RLNG intake for power generation which is why the RLNG consumption will increase in the month of January that is to last by end of February and when the canals closure end, the hydro generation will start with the demand of water from provinces. And in February, RLNG consumption in power sector will decrease. The official said that in 8 months except November and December, Pakistan need over 1 billion cubic feet RLNG and in two months it need 800 mmcfd. To ensure over 1 bcfd in 8 months, Pakistan needs to import 200 mmcfd that is to ensure stability in LNG flows which is why Pakistan wants to ink more import from Qatar but close to existing LNG spot buying price which stands at 9 percent of Brent.

However, the relevant officials in Petroleum Division said that Pakistan after two years from now onward, the RLNG based power plants will be shut down in every winter season because of low demand of electricity. The previous government while installing the RLNG based power plants in Punjab has deliberately ignored the fact that it is also installing the coal based power plants at Port Qasim, Sahiwal and Thar with the remaining coal based power plants in the pipeline.

The coal based power plants come first in the economic merit order and with the initiation of new coal based power plant at Hubco and the other one which is in pipeline at Jamshoro being installed with the assistance of ADB, in the winter season, the electricity demand will be met with power plants which run on local gas, Thar coal based power plants, imported coal based power plants, nuclear power plants and more importantly from windmills. This means that the RLNG power plants which come at the end of economic merit order if furnace oil and diesel run power plants are not used. So in the summer season, now from onward after two years’ time, RLNG based power plants will be made operational as the electricity demand will be met by the power plants that come first in the economic order.

Economic order means the plants that produce cheaper electricity is run first by CPPA (Central Power Purchase Agency) and NPCC (National Power Control Cell).

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