The LNG mystery

The first shipment of LNG arrived at Port Qasim on March 26 – but left crucial questions hanging. Who had imported it? What was the price paid for it? And how had an LNG shipment arrived without the finalisation of a contractual agreement between Pakistan and Qatar? On March 26, the petroleum minister delivered the ‘good’ news that 60,000 tonnes of LNG had reached Port Qasim, which would suggest that the import was negotiated by the federal government. However, on Thursday it emerged that the first LNG consignment of 60,000 tonnes was actually imported by the private sector. At one level, this saved the federal government from embarrassment as it had been given a March deadline for importing its first shipment, but the entire affair left a strange taste in the mouth. The two importers are Universal Gas Distribution Company Private Limited and Pak-Arab Fertilizer. Half of the imported gas will be used by the CNG sector and the other half by the Pak-Arab Fertilizer Company. Petroleum Minister Shahid Khaqan Abbasi confirmed that both companies had storage and re-gasification facilities ready.
What is confusing is how the federal government and private sector are both importing LNG from the same company at the same time. In a report in this newspaper it has been officially confirmed that payment for this first shipment was made through a letter of credit by PSO, the state oil company. PSO officials explained the money had been provided by two private sector importers as they had no know-how and experience to import their raw material. These admissions compound the mystery. How and why did two big private companies pay $30 million to PSO for importing from Qatar? Why was it not done through an open international tender? The PSO brag in a newspaper ad claiming credit for the first LNG ship creates more doubts as PSO says this LNG will be given to many users while Minister Abbasi says it is for only two private companies. These questions need urgent answers. The final meeting to decide the LNG deal with Qatar is due to be held on April 1, with the government to be ready to import LNG by April 15. A 15-year supply deal is expected to be signed. With the imports of LNG already underway, it is strange that the petroleum minister refused to confirm what the rates negotiated with the government were going to be. The private sector rates are $8 per MMBTU, with Sui Northern set to charge 11.5 percent UFG (unaccounted for gas) from the CNG sector. The import by a CNG distribution company is also a red herring. The minister announced that GST on imported LNG used by the CNG sector had been reduced from 17 percent to 5 percent. The CNG sector appears to be set for another short-term boom, but there is no guarantee of its long-term stability. More importantly, IPPs have yet to agree to using LNG. The government has claimed it would save $300 million a year if it were to divert it to Kapco. While the LNG deal, once it kicks in, should be a good short-term measure, there are too many ifs and buts remaining in the matter for now.