LNG import terminals

Prime Minister Shahid Khaqan Abbasi while inaugurating the second Liquefied Natural Gas (LNG) terminal in Karachi stated that the PML-N government is committed to eliminating the energy shortage from the country and claimed success in reducing the supply-demand gap. He added that Pakistan at present is importing 600 mmbtu LNG from Qatargas (through a deal signed with Pakistan State Oil) through Elengy terminal while with the completion of the second terminal another 600 mmbtu of this commodity would be imported.
The two terminals are privately-owned with Elengy owned by Engro, a large private sector company, and the recently inaugurated terminal owned by Iqbal Z Ahmed and Fauji Foundation though the latter had applied separately but failed to meet the tender's specifications. It is extremely unfortunate that in Pakistan contracts awarded to private companies after following due process in inviting tenders have become controversial on the grounds of nepotism and/or collusion between the government and the private sector. In this context, three relevant facts need to be highlighted. First and foremost, a part of the LNG deal inexplicably blacked out on the PSO website notes that "the buyer may request no later than 15 days prior to loading date the sellers' consent to take delivery of the relevant cargo at the receiving terminal other than the Elengy import terminal ...the seller shall provide its consent (such consent not to be unreasonably withheld or otherwise) to deliver to the alternate receiving terminal as soon as reasonably practical." The deal further notes that the Q flex vessel acceptance - with 50% larger cargo capacity and 40% lower energy requirements and carbon emissions compared to conventional vessels - was not achieved by 31st March 2016 and it is unclear whether agreement has been reached to date; and whether PSO is, as per the agreement, using any "LNG vessel within the Integrated Fleet which may include conventional vessels to deliver LNG," with integrated fleet defined in the agreement as "all LNG vessels which have been duly nominated by the seller as part of the integrated fleet." It is unclear whether PSO had explored other possibilities, including private shipping companies and/or purchasing a vessel.
Secondly, Elengy terminal was built at a cost of 150 million dollars, with loan agreements signed with International Finance Corporation and Asian Development Bank and is projected to earn 1.8 billion dollars in 15 years - the duration of the Qatargas/PSO deal with the government guaranteeing to pay capacity charges whether ships are unloaded at the port or not. The high profitability of this terminal was being investigated by National Accountability Bureau but the case has been closed since. The results of the NAB inquiry need to be made public.
Thirdly, there have been a number of investigations against some of the sponsors of the second terminal. The foregoing highlights the importance of transparency in all deals - government to government and government to private sector - as questions may arise which mar the propriety of the deal itself and have a negative political fallout to boot. It is hoped that the Abbasi administration takes cognizance of these concerns and addresses them.
Be that as it may, the government needs to focus on: (i) the tariff, as it is higher than in competing countries which disables the productive sectors from competing in the international market as well as domestic market given our massive porous borders; and (ii) ensuring efficiency in the power sector that continues to be hostage to a rising circular debt, poor recoveries from government ministries/departments and a transmission system that is unable to transmit capacity output of the PPP tenure leave alone the enhanced generation capacity in 2017.