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Qatar to be approached for revision in LNG prices

By Israr Khan
January 15, 2019

ISLAMABAD: Pakistan will request the Qatari government for revision in Liquefied Natural Gas (LNG) prices and credit facility for this super-cooled gas imports to get a cushion for coping with the ‘Godzilla-like’ current account deficit burden.

Prime Minister Imran Khan is likely to visit Qatar on 22 January 2019. Pakistan’s annual imports of LNG are around $4 billion. “Prime Minister Imran Khan may also request to provide credit facility for LNG imports and revision in the LNG prices during the upcoming visit to Qatar,” Petroleum Minister Ghulam Sarwar Khan said.

Under the 15-year LNG import deal with Qatar, Pakistan is importing most of its LNG from this gas-rich gulf country. Islamabad would request Doha to provide it with credit facility up to a year interval and also give concession in its price, which would be a major support from this Islamic country.

It is worth mentioning that Saudi Arabia and the United Arab Emirates (UAE) have committed $6 billion [half by each] to be deposited in the State Bank of Pakistan (SBP) as Forex reserves, of which Riyadh has deposited $2 billion so far. Besides, both have also agreed to give Pakistan annual oil facility on credit to the tune of $3.2 billion each for three years.

Regarding the recent visit of Saudi Arabia’s Energy Minister, Sarwar Khan said that Saudi Arabia had offered Pakistan sale of LNG and also expressed interest to invest in four key areas, which include petro-chemical complex, minerals exploration, industry, especially phosphate fertilizers and renewable energy.

The minister said that Japanese Mitsubishi Company is also keen to come in the LNG business in Pakistan. “So, competition in LNG supply will increase resulting in lower prices”, he said. Initially, Saudi Arabia has committed to invest $10 billion in Pakistani economy, by establishing an oil refinery with capacity of 0.2 to 0.3 million tons of oil per day and petro chemical complex at Gwadar, Balochistan. Riyadh has also expressed interest in investing in LNG-based power plants.

Pakistan and Saudi Arabia would sign an MoU by next month for setting up this refinery at Gwadar and the Saudi crown prince would visit Pakistan for this purpose.

The UAE would also set up an oil refinery in Pakistan, that would also have the capacity up to 0.2 million tons/day with the provision of enhancing its capacity. As these refineries have provision to enhance its capacities, so it would not only help Pakistan meet its finished petroleum products demand, but could be also re-exported.

Pakistan has recently given incentives, including tax exemptions, to oil and gas drilling in offshore sector. The government is mulling over a plan to give incentives to oil and gas exploration companies for onshore drilling.

“We are considering extending these tax incentives to companies engaged in onshore drilling,” Ghulam Sarwar Khan said. The government is also in process of devising energy policy and he had held meetings with chief ministers of Balochistan, KP and Sindh to take them on board. Offshore drilling had started in the country.

“The process of forming new energy policy would be finalised in March,” he said adding that the government would take all stakeholders on board to fine-tune the draft of new energy policy. The government wanted the exploration companies to start exploration work on two blocks in Balochistan.

The minister said the cabinet had discussed the policy on new gas development schemes. All the three gas producing provinces [Sindh, Balochistan and KP] had the first right on gas utilization under Article 158 and they were not ready to provide gas supply to other provinces. Demand of gas in Punjab was higher. The government was working on comprehensive energy policy to address all these issues.

He said that countries like the UAE, Saudi Arabia and Qatar had gas but they did not have pipeline gas. He said that Pakistan was the only country in the region where consumers had luxury of pipeline gas. ‘There is no rationale to increase network of pipeline gas,” he added.

The government would reconstitute board of directors (BoDs) of state-run oil and gas companies through advertisement. After the boards are formed, they would initiate process of hiring new heads of oil and gas firms.

“We are going to advertise the post of board of directors in line with the advice of Law Division,” Petroleum Minister Ghulam Sarwar Khan said adding that apex court had given the decision that boards of directors be hired through advertisement. This process would take three to six months. The boards would select their respective chairmen and managing directors (MDs).