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Wednesday September 28, 2022

Pakistan may seek 15-year LNG deal with Qatar

Prime Minister Shehbaz Sharif to visit Qatar in coming days for relief in LNG supply, senior official of coalition government tells The News

August 17, 2022
A liquified natural gas (LNG) tanker is seen in this File Photo
A liquified natural gas (LNG) tanker is seen in this File Photo

ISLAMABAD: Pakistan may seek a 15-year LNG contract with Qatar on a G2G (government to government) basis — two cargoes in a month with a reopening price clause after 11 years — during the forthcoming visit of Prime Minister Shehbaz Sharif, a senior official of the coalition government has told The News.

“The likely dates for the visit of the premier are August 23-24, but these are yet to be finalised,” the official said, adding that Pakistan was also likely to offload PIA shares to hand over the management of the national flag carrier either to Qatar or the UAE on a G2G basis. Apart from it, the Islamabad airport was also proposed to be handed over to any of the two countries. “PIA has been running into huge losses for a long time and it will be sane to hand over its management to either Qatar or the UAE. And the Islamabad airport is also not running efficiently,” he said.

In addition, there is a proposal to sell out two RLNG-based power plants, Haveli Bahadur Shah and Balloki. The 1,223 MW Balloki combined-cycle gas-fired power plant bridges the energy shortfall in Pakistan by being one of the most efficient power plants globally. The plant has over 61 per cent efficiency. The plant entered commercial operations in July 2018 and generates the equivalent power needed to supply more than six million Pakistani homes.

The 1,230 MW combined-cycle Haveli Bahadur Shah project is the most efficient power plant in the world with an unprecedented efficiency of 62.44% on RLNG fuel. This high efficiency directly translates into huge savings for the national exchequer through fuel cost savings and will provide cheap electricity to people and industry. Apparently, the prices of both stand at $2 billion, but this transaction may not be feasible as Pakistan has the equity of $450 million in both projects, which can be sold out either to the UAE or Qatar with loans that the government acquired for the projects.

As far as the liabilities are concerned, buyers may not own them as these are created by the Pakistani management. So if both are sold out for $450 million, people and opposition parties will start criticising the decision. So these transactions may not occur.

Meanwhile, the Nepra also discounted the returns of both the plants to 12 per cent in dollar terms owing to which these may not be attractive to potential buyers. However, there are chances that the top functionaries will take up the sale of both the projects with the authorities of the UAE and Qatar too. Under the proposal, the buyers will be responsible to provide LNG to both the power plants, but they will have to pay for using the infrastructure of LNG terminals and pipelines.

Coming to the new LNG deal with Qatar, the official said this would be a third GtG LNG supply agreement with Qatar if Doha agreed to make the deal done at a time when LNG had become a rare commodity and all LNG producing countries and LNG trading companies were over-committed with European countries for the supply of the product till 2024 on account of the Russian invasion of Ukraine. The official said Qatar might offer an LNG deal to Pakistan from 2025 to 26.

Pakistan first inked a 15-year LNG deal with Qatar in February 2016 at 13.37 per cent of the Brent with a reopening clause after 11 years. Then it signed on February 26, 2021, a 10-year LNG deal with Qatar at 10.2 per cent of the Brent with a reopening clause after five years. Likewise, the country’s 100 per cent owned Pakistan LNG Limited in 2017 also inked two term-agreements with LNG trading companies ENI and GUNVOR. Currently, Pakistan is getting six cargoes per month from Qatar at 13.37 per cent of the Brent, two cargoes under 10.2 per cent of the Brent under GtG deals and is also getting one cargo every month at 12.14% of the Brent from ENI. The ENI is bound to provide to the Pakistan LNG Limited a total of 180 cargoes in 15 years at the PGPL terminal moored in Port Qasim. The PLL had also signed in 2017 a five-year term agreement with the GUNVOR at the price of 11.62 per cent of the Brent. The term agreement with the GUNVOR ended in July 2017.

It is pertinent to mention that Prime Minister Shehbaz Sharif mentioned in his last address to the nation on August 13 that during the PTI government, the Pakistan LNG Limited didn’t sign a long-term agreement with any LNG trading companies when it was available at cheaper rates of $4 per MMBTU during the first wave of the Covid-19 pandemic. And the same issue Finance Minister Miftah Ismail highlighted on Tuesday in a presser, saying that the PTI government lost the opportunity and the PLL during the PTI era didn’t ink an LNG agreement at $4 per MMBTU. It is interesting to note that acting MD Masood Nabi didn’t take any initiative to ink an LNG agreement with any LNG trading company some six months back, knowing the fact that the deal with the GUNVOR was going to expire in July 2022.

However, the prime minister has already announced constituting an inquiry commission to gauge the losses that all sectors of the economy, particularly the energy sector, braved during the PTI government.

During the visit, Shehbaz will also seek from Qatar maximum recruitment of Pakistanis as security personnel for the upcoming FIFA Cup.

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