Khaleeq Nazar Kiani
The Government is taking credit for the recent RLNG contract with Qatar, which is much lower than the Nawaz-led Government. The deal was finalized for ten years at 10.20% compared to the previous agreement of 13.37% of the Brent. Much cheaper, but it does not mean that the previous Government has taken kickbacks as allegedly investigated by the NAB, supposedly; if so, then why the present Government inked the agreement with the same party?
Mr. Nadeem Babar, in a talk show, accused the previous Government of locking the country in a long-term contract when apparently there was a glut forecast in the RLNG sector worldwide. He was somehow right sitting and talking after four years of the deal. Now his Government has also made the long-term contract, though with different terms, but alcohol is Haram irrespective of quantity.
Let’s see the forecast of the oil and gas sector globally after four years.
The world is very much concerned about climate change and is moving fast towards decarbonization. According to International Energy Agency, total wind and solar PV capacity are expected to surpass gas by 2023 and coal by 2024. In the next four years, wind capacity is forecast to increase by 50%, while solar doubles worldwide.
Energy efficiency is also progressing. Covid 19 played a catalytic role in reducing coal demand, and it is estimated that it will not recover to pre-Covid level. In 2025, renewable will be the largest source of electricity generation worldwide, and by the time renewables are expected to supply one-third of the world’s electricity.
The market for electric vehicles is also growing very rapidly. Europe will stop the production of combustion engines from 2025. Tesla’s (manufacturer of electric vehicles) share price of one year ranges from 70$ to 900$ with a market capitalization of $648.38 billion. In comparison, Exxon Mobil’s (oil and gas giant) one-year share price range is 30 to 57$ with a market capitalization of $230.17 billion. At times it was amongst the top five big companies in the world.
RLNG sector is also in the grand expansion phase. Qatar has decided to develop its LNG storage and loading facilities. The investment of $28.75 billion in the North East project will further raise the capacity from 77 nm tons to 110mn tons per year by 2025. Australia is also eying to become the world’s largest exporter of RLNG and has spent $200 billion in a decade on gas export plants.
The forecast scenario of RLNG is not much different than the year 2015. According to the PLL (Pakistan LNG Limited), the average spot price of the RLNG from 2017 to date is lower than the previous long-term contract. It is quite possible that the average spot price of RLNG may be down in the next four years than the present long-term contract. If so, then who will be responsible?
He also blamed the previous Government for not taking tangible actions to develop oil and gas exploration activities in the country. Now he has to check the performance of its ministry and the fact that PPL and OGDCL (Government-owned oil and gas exploration companies) have notably cut the investment in exploration. The share price of both the companies is very cheap, but big informed investors are not interested in the buying. There is no significant appreciation in the share price despite the increase of the oil prices in the international market. It appears that Government is also not interested in taking the risk of exploration. It may be due to the availability of the commodity at low rates from global markets. But they have to realize that when companies stop expanding, growing, the process of collapse begins.
