LNG is the best business to be in. For the record, the CEO of Elengy Terminal Pakistan Limited (ETPL) told the media that his company has completed the LNG import terminal at Bin Qasim port at a cost of “around $150 million”. Amazingly, the government of Pakistan, on behalf of 188 million Pakistanis, signed a contract that pays ETPL an amount of $272,000 a day. Lo and behold, $272,000 per day converts to $97.9 million dollars per year – and that is the equivalent of an annual, government of Pakistan-guaranteed return of 65 percent on an investment of $150 million. Lo and behold, ETPL will get back each and every cent invested in the LNG terminal in less than 600 days. Entrepreneurship or unadulterated rent extraction? Yes, Elengy Terminal Pakistan Limited is out there to maximise return on the company’s investment on behalf of the company’s shareholders – and there’s nothing illegal about that. But, isn’t the government of Pakistan out there to protect the interests of 188 million of Pakistan’s shareholders? LNG is the best business to be in. Spot price of $6.90 per mmBTU (C&F) over-invoiced to $8 per mmBTU (FOB) and the effort churns out a dirty profit of $3 million per shipment. Lo and behold, with just two shipments a month the annual clearance comes to a cool $72 million. The ground reality is that no Q-flex liquefied natural gas carrier can even get close to ETPL’s terminal-inappropriate dredging, high risk and awfully high insurance premiums. The ground reality is that the Ministry of Petroleum and Natural Resources (MPNR) has decided to use ETPL’s Floating Storage and Regasficiation Unit (FSRU) as an LNG carrier. Lo and behold, that would mean at least eight days of capacity payments at the rate of $272,000 per day. Lo and behold, there is now a connection between District Muzaffargarh and LNG. Kot Addu Power Company, Pakistan’s largest Independent Power Producer with a name plate capacity of 1,600MW is located in Kot Addu, District Muzaffargarh. As per Nepra’s (National Electric Power Regulatory Authority) approval, Kapco is getting light sulphur furnace oil (LSFO) at $10.85 per mmBTU. Lo and behold, Kapco is now going to be fed with re-gasified LNG at $14.30 per mmBTU. Somehow I thought that the entire LNG business was about reducing input costs. Lo and behold, LNG is now mostly about rent extraction – whereby political decision-making is bought by private firms and individuals in order to increase their wealth without any addition to societal wealth. Rent seeking is all about ‘rational, self-interested’ private firms and individuals seeking ‘unearned wealth transfers’ at the cost of 188 million Pakistanis. LNG is the best business to be in. Pakistan’s Independent Power Producers are making annual returns of 40 percent. Pakistani banks are raking in profits at 30 percent a year. The average annual return on Pakistani stocks has been 24 percent (14-year average). At 65 percent a year, LNG is the best rent extraction strategy. Naturally, power producers, bankers and stockbrokers all now want a part of the LNG pie. The writer is a columnist based in Islamabad. Email: farrukh15@hotmail.com Twitter: @saleemfarrukh
