Jul
9

LNG from Qatar: government going to import costly gas

BY PAUL SHERWOOD  |  POSTED IN MARITIME NEWS

Pakistan is pressing ahead with importing LNG from Qatar on government-to-government basis despite Doha's offered volumes being lower and price higher than those in the LNG tender recently scrapped by the Economic Co-ordination Committee (ECC). The ECC, sources said, has directed the Petroleum Ministry to negotiate import of 500 mmcfd LNG from Qatar, which official sources is within the realm of impossibility as Qatar is unable to offer more than 300 mmcfd LNG to Pakistan. 
In March 2013, Qatar offered to provide 250mmcfd to Pakistan at $17.437/mmbtu. But this offer did not include the cost of infrastructure necessary to receive and relay LNG in Pakistan. With the infrastructure cost of at least $200 million factored in, Qatar LNG works out at $19.521/mmbtu. 
In comparison, the lowest-evaluated bidder in the just-scrapped LNG tender - the third in Pakistan - offered 400mmscfd of LNG at an all-inclusive price of $17.7074/mmbtu. "The difference between the lowest tendered LNG price and the one offered from Qatar runs into hundreds of millions of dollars," said an industry insider, wishing not to be named. 
Chief Minister Punjab Shahbaz Sharif, Federal Minister for Petroleum Shahid Khaqan Abbasi, and Federal Minister for Water and Power Khawaja Asif will land in Doha on Monday to discuss LNG imports from Qatar. "It is very unclear which public sector company will put up the $200-300 million investment required to accept Qatar LNG," he said. In case private sector declines to invest public sector company has the finances to do so. 
The scrapped LNG tender envisioned 100 percent investment from the private sector. Dr Asim Hussain, the petroleum minister and later advisor in the previous government had initiated LNG talks with Qatar and acknowledged that the Qatar offer was more expensive. "The prices offered in the last tender were substantially less than Qatar," he had revealed to Business Recorder. The last offer from Doha was received by the Foreign Ministry and tabled by then Foreign Minister Hina Rabbani Khar. 
"Ironically, Qatar LNG was a People's Party project as well," says an insider. "The delegation, which expects they will get better terms, will come to the same conclusions that the previous government did. Why would Qatar sell gas to Pakistan at throwaway prices when it can get good market prices by selling it to countries that actually have LNG infrastructure?" 
Dr Hussain signed a Memorandum of Understanding between Pakistan and Qatar on February 6, 2012, for 350mmcfd of LNG. Qatar is the world's largest LNG producer. In addition to the Qatar option, the new government is also considering importing LNG from India. The plan envisions using Indian LNG terminals in Gujarat and bringing the gas not to Sindh, which is adjacent to Gujarat state, but directly to the Punjab. 
The Indians have offered a price of $22/mmbtu, which is the most expensive offer so far received. Pakistan wants India to waive off taxes to make the product more affordable. These discussions are ongoing and the process is allegedly being championed by a powerful businessman. The LNG tender which was scrapped was overseen by London-based QED Consulting at the recommendation of USAID. Three parties put in their bids: Engro, Pakistan Gasport, and Global Energy of Turkey.