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The LNG debate refuses to move beyond the long-term contract and spot prices. The ministry has of late been seen telling how the previous government inked expensive long-term LNG supply contracts, and how the average arrival of LNG at spot rates has been at steep discount to long-term deals. The petroleum ministry is not entirely to blame as the right questions are not being asked on LNG.

Here is what sheer numbers tell. Over the last 24 months, Pakistan has imported 226 vessels of RLNG. Nearly two-third of LNG has been imported under the long-term deal with Qatar, with 143 cargoes, at an average of maximum 6 cargoes per month – in strict compliance with the deal terms.

Not many would know but Qatar’s is not the only long-term LNG deal that Pakistan has signed. Another 21 percent of imported LNG comes via Pakistna LNG Limited under two sepearate contracts of 5-years and 15-years. Paksitan is supposed to import 180 cargos over 15 years at a monthly avearge of one cargo at the Brent slope of 11.95 percent, which is 11 percent cheaper than Qatar’s brent slop of 13.37 percent. Similalrly, 60 cargoes are to be imported over five years at a brent slope of 11.62 under the 5-year deal, which is nearing its completion.

The share of spot cargoes in the last two years has been at a lowly 16 percent, with an average brent slope of 10.44 percent – lower than all the three long-term contract prices, and 22 percent lower than the Qatar deal. This is what keeps giving birth to questions of Pakistan’s unwillingness to import spot cargoes during the peak Covid period.

What gets ignored is the fact that LNG imports will continue to largely remain a factor of demand in the country. Pakistan’s energy demand from March to September plummeted for most industries in the wake of Covid. Secondly, peak Covid came in months of low domestic demand, and the drop in industrial demand was enough to keep incremental imports away.

Granted that spot prices were very low during that period, but Pakistan could not have imported all that cheap LNG with nowhere to sell, Bear in mind the technology to keep LNG being stored for later use is still to be announced. All the gas must be transmitted through pipelines. And if not consumed, it will just create more technical troubles than one can imagine.

To put it mildly, Pakistan simply did not need to import more gas, even though it was cheaper. And no, it is not advisable to put sovereign contracts on hold in quest of cheaper rates. The whole purpose of long-term deals is to stick by the rules, in favorable and unfavorable times. Could the long-term deals have been struck at better rates? Yes. But that does not absolve Pakistan from its sovereign obligations.

Mind you, there is also the element of supply security attached with long-term deals. All leading LNG importing countries have a blend of spot and long-term deals to ensure supply in peak demand season. There is a reason why the average import unit prices of all the leading importing countries move in a close range over last five years.

It is now time that the debate graduates from pricing to what can be done to increase the LNG demand at home. What sort of buyer and seller models need to be followed to reduce the government’s role in LNG commercial dealings? How many terminals are required? What would it take to keep the distribution system at pace with LNG demand? What is needed to have better coordination among authorities to ensure compatibility of power evacuation based on LNG?