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December 5, 2020

SAPM Babar concedes LNG price in summer was lower for winter supply

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December 5, 2020

KARACHI: Special Adviser to the PM on Petroleum Nadeem Babar finally conceded what he had consistently denied earlier that the LNG price in summer was lower for the winter purchase. In October, LNG for December was available at USD5.50 per MMBTU but the deal was not contracted. Yet six cargoes were purchased in November when the tariff hiked to USD 7.25 per MMBTU for the December supply. It was revealed in the Geo News programme ‘Aaj Shahzeb Khanzada Kay Saath’ on Friday. The LNG price was lower during the summer in advanced sale for winter supply but Pakistan had to bear a loss of Rs6 billion in December due to spot rate purchase. It was revealed that the LNG prices were US$2 to US$3 per MMBTU, while the rate for winter supply was US$4.50 per MMBTU but the gas was not purchased. The rates in June for the December supply were $4.38 per MMBTU and in July it rose to $4.50 per MMBTU, and in August it shot up to US$5.50 per MMBTU.

Geo News Anchorperson Shahzeb Khanzada, in his analysis, said that SAPM Nadeem Babar and Federal Minister Omar Ayub kept on continuously denying the facts. When the documentary evidence was persistently highlighted, Babar admitted that the LNG rate in August for the December supply was $5.40 per mmbtu and in October for the same period the rate went up to $5.50 per MMBTU and if that was contracted, Pakistan could have saved approximately Rs6 to Rs7 billion only in the month of December because in November the December purchase cost Pakistan 16.9 percent extra for the six cargoes at USD7.25 per MMBTU that cost USD6 million per cargo, totaling US$36 million or Rs6 billion for the December purchase.

According to Nadeem Babar, similar losses were also identified from August to November due to inordinate delays and if the decisions were taken in July, then Rs37 billion could have been saved within a year.

Apart from this, the SAPM misrepresented the fact that the advertisement was given in October, but the bidding was conducted on November 2 and the supplier submitted the quotation at the final hours of that date. They had been observing the rate fluctuations but the government delayed issuing tenders.

The Government of Pakistan issued tenders with the submission date of September 5, 2019 and purchased LNG at 10.80 percent rate. Now in the current year due to unnecessary delay, the purchase was made at 16.90 percent rate.

Babar also similarly admitted that the demand was conveyed late in 2018 and the country had to bear Rs10 billion loss in that year. He said that he had joined the office in 2019, but before him, the earlier minister of petroleum had similarly delayed tenders in 2018 but persisted that it was not his fault but that of some others.

Similarly, costly electricity was produced by furnace oil though in November the furnace oil was not used to produce for that purpose.

It is pertinent to mention that when the issue was surfaced, the Ministry of Petroleum blamed the MDs of SSGC and SNGPL leading to the prime minister to sack them from their positions for apparent no fault of theirs.