LNG deal fi­nally

The Pak Banker - - 4EDITORIAL - Khur­ram Hu­sain

IT has been a long and dif­fi­cult road, but fi­nally we are near­ing the end. On Jan 13, the ECC gave its ap­proval for a deal for long-term sup­plies of LNG for Pak­istan, and al­most im­me­di­ately some quar­ters started rais­ing the spectre of cor­rup­tion. This whole cor­rup­tion mantra has be­come a bit of a re­flex for us now. Any deal cut by any govern­ment im­me­di­ately at­tracts al­le­ga­tions of cor­rup­tion. Never mind that those rais­ing the al­le­ga­tions them­selves, in their time, tried to cut the very same deal, and also faced the same al­le­ga­tions from those who are in govern­ment to­day.

This prac­tice needs to end, oth­er­wise noth­ing will ever get ac­com­plished in this coun­try. The last time we came close to hav­ing a long-term deal for the im­port of LNG, the cor­rup­tion al­le­ga­tions were echoed loudly in the me­dia, and the Supreme Court in­ter­vened, ex­am­in­ing the deal un­der the mag­ni­fy­ing glass be­fore de­cid­ing that there was no ev­i­dence of cor­rup­tion there.

From there the deal was sent to the law min­istry, that re­fused to grant the nec­es­sary sov­er­eign guar­an­tee and the deal died. It has taken us a decade to re­cover from that fi­asco and get to the point where we have an­other long-term LNG sup­ply deal, with a func­tional re­gasi­fi­ca­tion ter­mi­nal. Let's not blow it again. From the de­tails re­leased by the govern­ment, the deal is not a bad one. All im­ported con­sign­ments of LNG will be priced at 13.37pc of Brent crude, which is sell­ing at around $32 at the mo­ment. That comes to $4.3 per unit. Add to this var­i­ous charges, like freight and re-gasi­fi­ca­tion, and ac­cord­ing to the pe­tro­leum min­istry you have a price of $5.5 for the gas in the pipe­line. That's a lot bet­ter than what we had a decade ago. There are still a few ques­tions to be an­swered. Why did the govern­ment show so much def­er­ence to Qatar in sign­ing the deal? Ac­cord­ing to some news re­ports, Shell had sub­mit­ted a quote that was lower than Qatar, and the lat­ter was then given a chance to match this quote which they did be­fore the con­tract was awarded. The end-re­sult is still the same for us, long-term sup­ply of LNG at a de­cent price, but it does in­spire some cu­rios­ity about the ea­ger­ness to close a deal with Qatar rather than any­body else. Of course, that is as­sum­ing that the news re­ports are in fact true.

Any deal cut by any govern­ment im­me­di­ately at­tracts al­le­ga­tions of cor­rup­tion. There are also ques­tions about who has the right to the gas once it en­ters the sys­tem. The Sindh govern­ment is say­ing that nat­u­ral gas is a pro­vin­cial right, and the fed­eral govern­ment does not have the au­thor­ity to en­ter into a swap ar­range­ment with par­ties up­coun­try with­out first get­ting the ap­proval of the pro­vin­cial au­thor­i­ties. This is a valid point, but at best it's an ad­min­is­tra­tive prob­lem. It shouldn't be used to try and scut­tle the deal, but only to give the man­age­ment of the gas af­ter it has en­tered the SSGC sys­tem sharper fo­cus.

But the real dam­ag­ing di­men­sion to the story is the cho­rus of voices we have been hear­ing since April of last year at least loudly pro­claim­ing that cor­rup­tion has been com­mit­ted in this deal. No ev­i­dence has been pre­sented by any­one of this, but the al­le­ga­tions were re­peated again in Septem­ber and Oc­to­ber, by op­po­si­tion politi­cians.

One such episode from the Se­nate, back in April il­lus­trates the specious­ness of the al­le­ga­tions. One sen­a­tor from the PTI quoted press re­ports about a wildly high price be­ing ne­go­ti­ated for the LNG. An­other al­leged that PPRA rules had not been fol­lowed. Yet an­other ob­jected to the ca­pac­ity charges for the ter­mi­nal. An­other pointed to 'pres­sure' on the MDs of SSGC and SNGPL to sign their por­tions of the con­tracts. None of th­ese al­le­ga­tions, which have been re­peated all through the year, hold wa­ter when ex­am­ined. They are purely political slo­gans. PPRA rules are long out­dated and have been by­passed in some of the CPEC deals too. Would the good sen­a­tor like to raise the slo­gan of cor­rup­tion there too? And ca­pac­ity charges are a uni­ver­sal phe­nom­e­non in pri­vate-sec­tor en­ergy deals. We can de­bate if they are too high, but it is a lit­tle late in the day to be wak­ing up to the fact that they ex­ist.

One sen­a­tor from the PTI - Mohsin Aziz - was quoted call­ing the deal the "mega scam of the 21st cen­tury" and "eco­nomic ter­ror­ism". An­other from the PPP - Farhat­ul­lah Babar - re­port­edly ob­jected to the ca­pac­ity charges.

The for­mer is en­gag­ing in hype. The lat­ter should re­mem­ber that the IPP con­tracts signed by the PPP govern­ment fol­low­ing the Pri­vate Power Pol­icy of 1994 also con­tained ca­pac­ity charges, and th­ese were at­tacked by the next govern­ment as some sort of an un­fair pay­ment. Now he wants to en­gage in the same kind of de­struc­tive pol­i­tics from back then? And the PTI has racked up quite a track record of us­ing the id­ioms of the 'war on ter­ror' for purely political pur­poses. Chaudhry Sar­war fa­mously re­ferred to a with­hold­ing tax on bank­ing trans­ac­tions of non-fil­ers of in­come tax re­turns as a "drone at­tack on the econ­omy" once. This is sheer silli­ness. If any­body from the op­po­si­tion has any ac­tual ev­i­dence of cor­rup­tion in the deal, not cir­cum­stan­tial ev­i­dence, or sur­mis­ing based on an as­sump­tion, they should present it.

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