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Pakistan asks Qatar to slash LNG price review period

January 29, 2019

ISLAMABAD: Pakistan didn’t seek reduction in LNG prices with Qatari authorities during the recent visit of Prime Minister Imran Khan. However, it placed the request seeking the early review of LNG prices which will be done after 10 years as per the existing agreement with Qatar.

The PTI government wants the prices review after 5 or 7 years period, not after 10 years. More importantly Pakistan has also asked for additional import of LNG from Qatar during the summer season which will be in addition to the LNG that is being imported under the deal.

Federal Minister for Petroleum and Natural Resources Ghulam Sarwar Khan told this in wide ranging exclusive interview with The News here on Monday afternoon.

Pakistan delegation headed by PM Imran Khan went Qatar on a two day visit on January 21-22 with the mindset seeking no reduction in LNG prices, the minister responded when asked if Qatar has refused to accommodate Pakistan on the issue of reduction in LNG prices.

When stressed as to why PTI government has not raised the issue of LNG price which has been finalised by both countries during Nawaz era at 13.37 percent of the average price of Brent oil futures for the preceding three months during the visit as the PTI party in the past has been beating the drum that LNG deal done during Nawaz era had huge scam of omission and commission in it, the minister replied, saying that the government wants to take the country more closer to Qatar and in the past Imran Khan, Sheikh Rashid and he himself used to say that LNG deal would be made public and tabled in Parliament with secrete clauses, but now the government has taken U turn in favour of country for not making the deal public. “However, NAB is on its toes and vigorously probing into the LNG deal and the awarding of contract of LNG terminal to favorite company.”

However, Pakistan has asked top mandarins in Qatar to change the price review clause with period of 5 years not of existing 10 years. Moreover, PTI government has asked for LNG import on defer payment and to this effect, the top authorities in Qatar, the minister said, have assured that they will think and workout a separate mechanism for changing the price review clause as per the demand of the government but Qatargas Company has 75 percent shares in it whereas Exxon Mobil, Shell and other international companies have also shares in the company. “So authorities will have to take on board the international partners while amending the price review period and LNG import on defer payment,” the minister reckoned with.

As per LNG deal with Qatar, the contract price of the LNG per million British thermal units is the equivalent of 13.37 percent of the average price of Brent oil futures for the preceding three months.

Under the agreement, Pakistan can increase or decrease the size of the contract by five cargoes a year, equivalent to about 8 percent and the parties can’t renegotiate the price for 10 years. Pakistan can sell cargoes to other buyers and divert to other terminals.

The minister also disclosed that Qatar has shown its keen interest in building the LNG storages in Pakistan. Right now Pakistan has many depleted gas fields where in LNG can be stored and the authorities in Pakistan are also working on this very particular issue. Country needs more LNG in summer season of May, June and July and to this effect Pakistan offers Qatar to invest in installing LNG terminals. However, Pakistan has two LNG terminals and the government has extended to both the sovereign guarantee for off take of 1.2 bcf from the two LNG terminals. The minister said second LNG terminal has the capacity to re-gasify 750 mmcfd LNG and the additional LNG if Pakistan imports from Qatar can be re-gasified.

Coming to Gwadar-Nawabshah LNG pipeline which was abandoned by the Nawaz government apparently on the pressure of US and influential Middle East country as it was being considered by both the said countries that the same pipeline will later be extended from Gwadar backward by 70 kilometers towards Iranian border and will be made IP gas line, the minister said that the sitting government has decided to revive Gwadar-Nawabshah LNG pipeline and to this effect the petroleum division will soon pitch the summary with ECC arguing that the LNG pipeline is being restored not the IP gas line. As far as IP gas pipeline project is concerned, the minister said, on account of the sanctions re-enforced by Trump administration, the government finds itself difficult to move on the said project. However, the government is in touch with Iranian authorities on how to advance on the project in the presence of US sanctions.

About the inflated gas bills that end consumers are receiving, the minister said that the gas prices have been increased as the PML-N government has not increased the gas prices during its five year tenure inflicting mammoth loss of Rs197 billion to the gas companies—Sui Northern and Sui Southern.

The minister also said that Qatari authorities have also shown interest to purchase the LNG based power plants of Haveli Badur Shah and Balluki. Apart from it, Qatar also wants the food security and to this effect it wants to make investment in Pakistan’s agriculture sector.