WEB DESK: Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi in a written response to the National Assembly has revealed that the government, through its designated Liquefied Natural Gas (LNG) buyer Pakistan State Oil, has finalised the sale and purchase agreement with Qatargas for 15 years and on 20th November 2015 submitted it to the Economic Co-ordination Committee of the Cabinet (ECC), the highest economic decision-making body in the country, for its approval.
The ECC’s approval inexplicably remains pending in spite of the fact that energy shortages in the country remain acute and are not only the cause of lower than capacity national output but also a source of negative politicking against the incumbent government due to sustained load-shedding.
Abbasi in his written response admitted that there is a vast supply-demand gap of natural gas which is at present bridged through load management but “even with suspension of gas in industrial, CNG, power and fertiliser sectors the available gas is not sufficient to fully meet the demand of domestic consumers.” Domestic consumers happen to be high priority especially during the winter months.
A Business Recorder exclusive revealed that the Minister for Petroleum and Natural Resources expressed his anger at the failure of the ECC, under the chairmanship of Federal Finance Minister Ishaq Dar to agree on the re-gasified LNG pricing issue end-November 2015 prompting him to state that “ECC should take a decision to approve it or reject it; don’t put the entire burden on my shoulders.” The ECC approved the setting up of a committee under the chairmanship of the Secretary Law and Justice to look into the legal aspects of the agreement clearly reflecting the fact that Abbasi’s own colleagues and associated civil servants are concerned about certain aspects of the deal. There have so far been no reported meetings of this committee and the matter remains pending. To further complicate the issue another BR exclusive revealed end-December that a private party had offered RLNG to Pakistan for a period of five years at a price lower than what was offered by Qatargas. According to a senior official in the know, the country “received offers from M/s Shell and M/s Gunvor. The offer of M/s Shell is 13.83 percent of Brent whereas M/s Gunvor has offered 13.37 percent of Brent for five years as compared to M/s Qatargas’ offer of 13.9 percent of Brent.”
The delay by the ECC in approving the sale-purchase agreement with Qatargas, further complicated by two private sector players offering a lower price, has no doubt complicated approval of the sale/purchase agreement for more than five years. If one adds concerns expressed by the Sindh government with respect to the decision to inject the imported RLNG into the Sui Southern network while supplying upcountry with domestic gas produced in Sindh the situation is further complicated. Abbasi’s refusal to discuss Sindh concerns in a Council of Common Interest (CCI) meeting by stating that since RLNG is a fuel the decision is within the purview of the powers of the federal government has simply exacerbated federal-provincial mistrust.
Be that as it may, one cannot but support Abbasi’s contention in his interaction with the media in Karachi recently that “today LNG is the only cost-effective solution to Pakistan’s energy problems,” and challenged his detractors to propose another solution to deal with the current energy crisis. But he needs to be more transparent with respect to the deal itself, which is after all a commercial deal, as well as proactively seek to allay Sindh government’s concerns.
To conclude, ideally a mixture of long-term contracts where the price is benchmarked giving a sense of security to the seller and purchaser must be supplemented by not relying exclusively on one supplier and allow for some spot purchasing to benefit from a decline in oil prices.
Source: Business Recorder