Daily Times

In a welcome development, an agreement has been reached between Pakistan and Qatar for importing liquefied natural gas (LNG) for 15 years. According to the agreement, Qatar will provide Pakistan with a billion dollars worth of LNG annually. Qatar Liquefied Gas Company Limited will sell the gas from the year 2016 to 2031 to Pakistan State Oil (PSO). The need to import LNG is a result of the gas shortage and relatively higher cost of power generation through furnace oil and diesel fuel. The LNG will be pumped into the national gas grid to ease the gas supply and power crisis as well as serve the needs of the fertilizer industry. Under the terms of the agreement, Qatar will supply a total of 3.75 million tons of LNG to Pakistan annually on a government-to-government basis under a pricing formula that translates into a current price of LNG of $ 5.35 per Million British Thermal Units (MMBTU). The long-term LNG sales and purchase agreement (SPA) also provides for annual upward and downward flexibilities up to three LNG cargoes per contract year. As per the agreement, the two sides can review the price 10 years after the start date. And if they fail to do so, either party may terminate the SPA with effect from the end of the contract year in which the termination notice was served, in which case the supply period can be as short as 11 years. The provision of LNG would help meet up to 20 per cent of the energy requirements of the country and result in saving one billion dollars per year plus $ 600 million in diesel costs. The deal would help revive non-functioning electricity generation units of 2,000 megawatts and three fertiliser plants. This offer will really help alleviate the energy crisis caused by the gas shortfall in the country. The gas shortfall increases during the winter season when domestic consumers face load shedding of this utility in their homes.

Overall, the deal has a lot of positive prospects for the country. However, there are certain reservations regarding the agreement. With the LNG import deal again in the spotlight, quarters concerned have started expressing concern as to how the agreement could be in the best interests of the country. Factors that make the LNG import controversial include the absence of proper infrastructure to offload, store and transport the gas to various parts of the country as well as the reservations of the Sindh government. The latter has accused the federal government of not consulting it on the LNG import issue as well as its transmission, distribution, safety, environment protocols and pricing and tariff regime. It has also objected to the setting up of an LNG-fired power plant in Punjab alone while ignoring the other provinces. Other issues include the finalisation of the deal without going for international competitive bidding. Why did the government not prefer the option of purchasing gas from Iran and what will be the end cost of the LNG for a local buyer? It has been asserted by the Minister for Petroleum and Natural Resources Shahid Khan Abbasi that gas from Iran would be more expensive compared to the import of LNG from Qatar. The cost of gas being imported through the IP pipeline will be $ 5.70 per MMBTU and from the TAPI pipeline from Turkmenistan $ 5.90 on the basis of a benchmark Brent price of $ 40. The federal government needs to make sincere efforts to address all concerns regarding the deal. The Centre should not be biased against any province. All efforts should be made not to make this deal controversial by ensuring transparency and sharing all the relevant details. There should be a balanced policy and the government needs to address the concerns of all stakeholders. Pakistan needs to set up a proper system for injecting LNG into the national gas grid to fully transfer its benefit to the power sector, industry and the public. There should be proper arrangements for the safe transportation as well as the distribution of LNG to all parts of the country. *