LNG mishandling: More contradictions and spins

KARACHI: The Ministry of Petroleum in order to hide Rs 122 bn losses incurred to the country in the mismanagement of the LNG episode, continues to waltz over its stance on the issue, denying, conceding and denying it once again.

In the Monday’s episode of Aaj Shahzeb Khanzada Kay Saath, the host, Shahzeb Khanzada presented some new startling facts. He said that after taking so many divergent turns, the spin masters of the Ministry of Petroleum are now manipulating it to say that on Saturday when they “cited availability of LNG at USD 4, they did not mean it was available at that rate.”

They said JKM ( Japan, Korea Marker) benchmark is used for gas sales in South East Asia only. Whereas Pakistan purchases gas in approximation with the Brent Oil Slope or percentage instead. The Brent Liquid Forward Curve is available but that does not exist for LNG, they further maintained. But in a strange twist, they said If the LNG is required for advanced delivery on Brent Slope then JKM forward curve can be applied to determine the Brent Slope. With this Khanzada said the Ministry of Petroleum wizards both disagree and agree to employing JKM benchmark for gas sales.

The Special Adviser to Prime Minister on Petroleum, Nadeem Babar, justified contracting expensive gas for December by opening bids in late November, by referring to a Bloomberg fuel expert. However, the same specialist confirmed in his tweet that in South Asia the prices remain at a lower ebb. Prime Minister Imran Khan must ask Babar to stop dragging the government in mud by switching stance on the issue so many times.

According to JKM benchmark from June to August, LNG was available at USD 4-USD 5 for December meaning thereby that at USD 42-43 Brent oil, 10-12.5 per cent slope was available. In this case then what was the wisdom of placing orders for December in late November and that too at 17 per cent elevated rates. This caused a painful Rs 6bn loss in a month and on the annual basis would inflict an unbearable damage of Rs 37 bn.

The anchor further said on Sept 25 Reuters reported India contracted LNG for November at USD 4.7-USD 4.8. But since we have a long painful tendency of wasteful expenditures, the Government of Pakistan let go off the golden opportunity, awoke from the slumber and contracted to acquire the gas at 14.2 per cent enhanced rates of over USD 6, causing loss of billions of rupees.

On Oct 9, 2020, it was reported that for November delivery the cost had risen to USD 5.5 and for December it had gone up to USD 5.7. But even then timely contracts were not made for December.

In July, when the LNG was available at less than USD 3, Pakistan acquired gas for December at USD 4-USD 4.5, which could have been easily acquired at cheaper forward contract rates. Similar opportunities were lost in Aug to November and billions were wasted. The prime minister must initiate a thorough probe as to who benefitted from the bonanza.