The price of Liquefied Natural Gas (LNG) as per the 2016 deal signed with Qatargas for 15 years at 13.37 percent of Brent is considerably more expensive than what is available at spot rates today. Saudi Arabia and Malaysia offered LNG at relatively cheaper rates and the government is weighing its options on the matter, Ghulam Sarwar Khan, Federal Minister for Petroleum told Business Recorder.
On Wednesday, Pakistan decided in principle to import 200 mmcfd additional LNG from Qatar under a government-to-government deal, ignoring a relatively cheaper offer from Saudi Arabia and other countries. The Economic Coordination Committee (ECC) directed the Petroleum Division to nominate a price negotiation committee with Qatar to the ECC.
On March 11, Pakistan LNG Limited finalized six cargos with deliveries scheduled for between May 1 and June 30 with the lowest evaluated bids ranging from between 9.2 percent and 9.9 percent of Brent price (Brent price of around $70 a barrel). LNG rates in the fixed spot market for deliveries in May dropped to $4.7 per million British thermal units (mmBtu).
The Khan administration is considering signing new LNG import deals aimed at meeting Pakistan's rising demand requirements. Petroleum Division is engaged in undertaking a comprehensive LNG demand/supply analysis in consultation with all the stakeholders. In winter 2018, Sui Northern Gas Pipeline Limited (SNGPL) injected 400 mmcfd additional RLNG to meet the gas shortage of domestic consumers (additional to what was already within the system inclusive of system gas and what is contractually imported under the deal with Qatar).
The import of RLNG for domestic consumer has increased Pakistan State Oil's (PSO) circular debt from Rs 13 billion in November 2018 to Rs 70 billion in February 2019, a former Managing Director told Business Recorder.
Qatar authorities did not take up the request of Pakistan government to provide gas valued at $4 billion on deferred payment during Prime Minister Imran Khan's two-day official visit to Qatar, however, they agreed to supply additional LNG at cheaper prevalent market rates, sources said. Private sector has suggested to the government to give preference to spot purchase of LNG for the next six months as its price is projected as lower than fixed percentage agreement signed with suppliers.
Hussain Sharif, one of the LNG experts, said that there are a few things the government should now look into seriously on a war footing so that maximum LNG can be imported and terminal utilization is at full capacity.
Minister for Petroleum Ghulam Sarwar stated that government of Pakistan Tahreek-e-Insaaf (PTI) was not investigating the long term LNG contract with Qatar. The ministry handed over relevant documents relating to long term LNG import contract with Qatar to National Accountability Bureau (NAB), he added.
Pakistan cannot reduce supply from Qatargas under the 2016 deal as cancellation/reduction of what was agreed would be payable by Pakistan until Qatargas finds a new buyer. Any difference between the 2016 deal price and the price charged by a new buyer would be payable by Pakistan.
On Tuesday, former Prime Minister Shahid Khaqan Abbasi appeared before NAB's Combined Investigation Team (CIT) in connection with irregularities in the LNG contract award. During his previous appearance, the CIT handed Abbasi a questionnaire with the direction to furnish his response. Later, Abbasi told the media that he required government record to provide answers to the questionnaire and added that "I have written a letter to the ministry concerned to provide the required details."