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December 1, 2020

PML-N set up: LNG terminals under expensive agreements: Nadeem

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December 1, 2020

ISLAMABAD: Special Assistant to Prime Minister on Petroleum Nadeem Babar on Monday said the PML-N government ruined the gas sector by setting up two LNG terminals in haste under expensive agreements and that too without constructing storage facilities.

Addressing a news conference along with Minister for Energy Omar Ayub Khan, he said contrary to the worldwide practice, the past government set up Liquefied Natural Gas (LNG) terminals sans storage facilities for a huge market like Pakistan. Whenever LNG terminals are installed in any part of the world where Pakistan-like gas infrastructure exists, storage facilitates are a must.

The SAPM said LNG terminals were set up at fixed payment (take or pay method) at around $0.5 million per day, but remained reluctant to construct any storage, which eventually caused a huge loss to the national exchequer. He said since the PTI government came into power, there were nine such months during which only 800 million cubic feet per day (MMCFD) or less LNG was sold due to less demand from consumers. It means: “We have wasted a huge amount under half-a-million dollar per day contract, signed by the previous government.” Setting aside misleading figures given by a former prime minister, Nadeem Babar said for a 12-month period (January-December 2020), the government had purchased 19 spot cargoes on the average cost of around 22-25 million dollars per cargo, which stood at around Rs 75-76 billion. “Our spot purchases are so beneficial that if all cargoes are obtained free of cost, even then the cargoes cost remains around Rs 75-76 billion.”

He rejected the misleading notion that the spot buying caused Rs 122 billion loss to the national kitty. He explained that the spot market is always down during summer and high in winter as per the market trend and financial disciplines. If a cargo is available at 10 per cent of the Brent in summer, it would not be available in December at the same price. The seller will quote the projected cost of the Brent for a six-month forward delivery. December price will not be available in summer. Nadeem Babar said during 1 September-2018 to 30 November-2020, the government had bought around 35 spot cargoes at an average cost of 10.4 per cent of the Brent, if it was compared with 13.37 (as per the previous government’s expensive agreements), there is around $200 million saving. He said the former prime minister had misled the public by giving distorted facts and figures about gas-sector circular debt, adding that the PML-N government had left around Rs 300 billion circular debt. The previous government did not increase the gas price for political gains during its five-year term, ignoring the tariff determined by the Oil and Gas Regulatory Authority (OGRA) from time to time, which caused a huge loss to the national exchequer.

He said it is the Pakistan Tehreek-e-Insaf (PTI) government which took bold initiatives in the supreme national interest and increased the gas price twice, expressing the confidence that the old circular debt would be cleared gradually in the coming years.

Answering a question, the SAPM said he would never suggest setting up LNG terminals as per the practice of the previous government as it hurt national interest. That’s why, he said, the PTI government, under its ease-of-doing strategy, is encouraging the private sector to set up its own terminals and import LNG to compete the public sector companies and meet the consumers’ ever-growing demand.