Import of Liquefied Natural Gas (LNG) is becoming as controversial as rental power projects during the previous government, well informed sources told Business Recorder. All nine LNG cargoes received to date and consumed in the country were procured at spot rates from Qatargas on FOB basis pursuant to Master Sale Purchase Agreement (MSPA) signed between PSO and Qatargas, according to a summary for the ECC of the cabinet dated 2 September.
However, no details of the MSPA have been released at any forum, including parliament. The Minister has maintained that once Pakistan and Qatar sign a Sales Purchase Agreement (SPA), he will then share it at all fora. Pakistan State Oil, a subsidiary of the Ministry of Petroleum and Natural Resources, procured all nine cargoes and on-sold two cargos to the private sector. Confusion arose when the Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi went on record to state that LNG was imported by the private sector and the government had nothing to do with it. The Minister also contended that PSO simply facilitated the import of LNG after the government allowed it to import LNG on the same pattern as those for other fuels.
An official of Inter-State Gas system (ISGS) directly dealing with the imported gas projects including LNG said the final agreement between Qatar and Pakistan was being delayed for two main reasons: (i) Port Qasim Authority's (PQA) failure to develop the required channel depth of 14 meters for docking of LNG ships which remains incomplete; (ii) Ministry of Water and Power's failure to persuade diesel fired Independent Power Plants (IPPs) to open letters of credit (LCs) and establish a payment mechanism for importing the commodity.
The official said that it was the best time for Pakistan to ink an SPA with Qatargas as the international fuel prices have reached record low levels. Crude oil price is hovering around $40 to $50 per barrel and if we are entering an agreement with Qatar at 13.5 % of crude oil price the commodity will cost us around $6-$6.75 per MMBTU. Oil and Gas Regulatory Authority (Ogra) requested the Petroleum Ministry to issue a special SRO so that the regulator can determine provisional LNG prices for consumers, but the Ministry in response asked the authority to fix LNG prices as per the 2006 LNG Policy.
Ogra estimates LNG imports and onward sales to be around Rs 34 billion which includes import of the product and its sale by PSO, without any legal cover as there is no notification of LNG price. Ogra has refused to determine the LNG sale price and has asked the Ministry of Petroleum and Natural Resources to provide full record of LNG imports and its sale to different consumers by PSO so that after examining the record the regulator can determine the LNG sale price.
Elengy Terminal Pakistan Limited (ETPL) Chief Syed Muhammad Ali while confirming that National Accountability Bureau (NAB) has started a probe into the award of LNG terminal construction contract, said that so far NAB has not sought any details from EPTL. He added that NAB has got details of an LNG services agreement from Sui-Southern Gas Company (SSGC).
According to Ali, NAB is probing the entire process for the award of the LNG terminal contract, but insisted that the process is transparent as the government floated a tender in which ETPL was declared a successful bidder. According to the EPTL chief, Engro has invested $150 million to construct Pakistan's first LNG terminal and it was completed in a record time of 11 months. He added the second part of investment went to Floating Storage and Re-gasification Unit (FSRU).
EPTL's LNG terminal has the capacity to handle 600 Million Cubic Feet per Day (MMCFD) and under an agreement with the government, in the first year it will re-gasify up to 200 MMCFD of LNG. And from March 26, 2015 when first LNG ship arrived at Karachi port till to date the terminal has handled 25 billion cubic feet of LNG.
The terminal's tolling fee is $1.3 per mmbtu for the first year for handling 200 Mmcfd, which will be reduced to $0.66 in the second year for handling 400 Mmcfd. The Economic Co-Ordination Committee (ECC) of the Cabinet has approved pricing parameter for RLNG, which includes 4 percent PSO margin, $0.5/mmbtu SNGPL/SSGCL administrative margin, subject to a review after three months by a committee, consisting of secretaries of finance, petroleum, water and power and law.
Former Federal Minister for Finance, Saleem Mandviwala said the Federal Minister for Petroleum and Natural Resources has denied inking any agreement with Qatar government as yet. Taking about the concerns of the Sindh government on the issue of LNG import and a swap agreement between SSGC and SNGPL, he said that the Sindh government has asked the federal government to provide royalty on the pattern of local gas as LNG was being supplied to Punjab by utilising Sindh's route.
Mandviwala said that LNG was being imported for Punjab but as per swap agreement it was being injected into the SSGC system and local gas from Sawan and Zamzama gas fields was being diverted to SNGPL system. "Government of Sindh has taken the position that swapping arrangement without concurrence of Sindh government is a violation of Article 158, which guarantees precedence of natural gas producing province over others in utilization of natural gas. This arrangement may compromises energy security of province, which produces over 70 percent of country's gas. Moreover, mixing of 'imported' gas with indigenous gas and subsequent revenue determination of gas without authorisation of Council of Common Interest (CCI) is unconstitutional," Mandviwala said.
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