Hinting at low price LNG deals

In comparison with the volatile crude oil prices, liquefied natural gas (LNG), if purchased at the prevailing standard international prices, will prove a game-changer for Pakistan’s economy. Plans are underway to make more long term supply arrangements of LNG at comparatively lower price than the previous one of PML-N government through government-to government deals and tenders. Pakistan LNG Limited (PPL), which deals with gas imports, is voicing hopes that in future deals price will come down leading to savings of billions of rupees.

At present Pakistan State Oil (PSO) is importing six LNG cargos per month at old price, which is higher than its international price. It is because of US dollar 4to 5 differential per mbtu in comparison with import price of LNG by India, China and Australia that opposition politician Sheikh Rashid Ahmad is persistently agitating the issue for conducting a probe into the LNG import deal with Qatar and approached NAB in this regard. The deal was finalised by former Prime Minster Shahid Khaqan Abbasi, when he was the minster of petroleum and natural resources in Nawaz Sharif’s cabinet.

The demand for LNG for power generation is increasing and PPL has been allowed to bring six more cargos based on the requirements of power producers and Sui Northern Gas Pipelin4es limited. So far PPL has struck mid-to- long term contracts for two LNG cargos per month and is in the process of bringing the remaining four cargos. A senior government official has revealed that efforts are underway to enter into deals at better price which may ensure foreign exchange savings of $ 300 millions per year or $ 3 to 4 billion in oil imports over the next decade as well and bring down average LNG price in Pakistan.

LNG is gradually replacing the costly diesel and furnace oil in thermal power generation plants. The conversion of all thermal power plants to LNG that is purchased at international price, and not the one agreed by previous government with Qatar, will accrue savings of $ 2 billion annually through more efficient power generation at 62 percent efficiency with lower tariff of Rs. 7 to 8 per Kilowatt-hour.

The fresh deals at the current price in the global market for LNG import and its usage for thermal power generation will be a big step for achieving optimal energy mix. It will certainly bring down the cost of production in manufacturing and agriculture sectors, making our exports of finished goods and primary commodities competitive in the International market. Saudi Arabia and UAE have imposed an economic blockade on Qatar that provides an opportunity to renegotiate the LNG deal made by PML-N government with a view to secure better price as compared with the earlier one.

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