Fresh talks with Qatar likely to cut LNG im­port

The Pak Banker - - FRONT PAGE - Staff Report

Pak­istan is ex­pected to re­quest Qatar to re­duce its liq­ue­fied nat­u­ral gas ( LNG) sup­plies un­der a ' take or pay' long-term con­tract as its en­ergy de­mand tum­bles amid an eco­nomic slow­down.

In­formed sources told Dawn that the pro­posal for fresh talks with Qatar had come up for dis­cus­sion at a meet­ing of the Eco­nomic Co­or­di­na­tion Com­mit­tee (ECC) of the cabi­net on Nov 28 as part of risk mit­i­ga­tion on ac­count of pri­vati­sa­tion of two LNG-based 2,650MW power plants of Na­tional Power Parks Man­age­ment Com­pany (NPPMC) - Haveli Ba­hadur Shah and Bal­loki in Pun­jab.

The pro­posal to take up the chal­lenge with Qatar was floated by Dr Ab­dul Hafeez Shaikh, Ad­viser to the Prime Min­is­ter on Fi­nance, ac­cord­ing to sources in the petroleum min­istry.

Nadeem babar, Special Ad­viser to the PM on Petroleum, in­formed the ECC that an ear­lier at­tempt at the high­est level for re­duc­tion in LNG price was not ac­cept­able to Qatar. He re­called that dur­ing a visit of Prime Min­is­ter Im­ran Khan to Doha ear­lier this year, Qatar was re­quested by then fi­nance min­is­ter Asad

Umar to re­duce the price of LNG be­ing sup­plied to Pak­istan (at 13.37pc of Brent) un­der a 15-year con­tract.

Move part of risk mit­i­ga­tion on ac­count of two LNGbased power plants' pri­vati­sa­tion Mr Babar re­ported that Qatari au­thor­i­ties had ex­plained point blank that price re­duc­tion was out of the ques­tion, given its 26 sim­i­lar agree­ments with other coun­tries. How­ever, they were ready to con­sider any other idea to min­imise Pak­istan's loss.

Two op­tions were thus con­sid­ered, in­clud­ing Qatar's for­eign ex­change de­posits in Pak­istan's banks and sup­ply of ad­di­tional LNG quan­ti­ties at cheaper rates.

One of the op­tions - ad­di­tional LNG sup­ply - was struck down by then petroleum min­is­ter Ghu­lam Sar­war Khan.

Dr Shaikh ad­vised the petroleum divi­sion to take up with Qatar fresh op­tions such as di­ver­sion of con­tracted LNG sup­plies and Pak­istan would be ready to ab­sorb the price dif­fer­en­tial.

The power divi­sion had pro­posed ex­empt­ing the two power plants from 66pc guar­an­teed LNG off-take to fa­cil­i­tate their pri­vati­sa­tion. It was re­ported to the ECC that an ad­di­tional cu­mu­la­tive im­pact of about Rs471bn was es­ti­mated on the bas­ket price of power due to the guar­an­teed off-take of 66pc up to 2025 on ac­count of dis­patch of these plants be­yond the prin­ci­ple of eco­nomic merit or­der shall be al­lowed as sub­sidy to pri­vate sec­tor con­sumers.

Some ECC mem­bers pointed out that it ap­peared to be an un­wise de­ci­sion to sell two power plants for about Rs300bn and then in­cur an an­nual sub­sidy of Rs 117bn for LNG price dif­fer­en­tial for these power plants.

The Pak­istan State Oil and the two Sui gas com­pa­nies also op­posed with­drawal of 66pc an­nual LNG off-take, say­ing their back-to-back agree­ments were based on power sec­tor con­sump­tion and they would go bank­rupt.

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