Pakistan's ministry of petroleum and natural resources is planning to negotiate an LNG supply agreement with Qatar on a state-to-state basis as well as float tenders for LNG import through competitive bidding.

Internews/Islamabad

As the Pakistan cabinet has finally accorded approval to a liquefied natural gas (LNG) terminal services agreement with Elengy Terminal Pakistan Limited (ETPL), the Ministry of Petroleum and Natural Resources is weighing two possible options before clinching gas supply deals.

The ministry is planning to negotiate an LNG supply agreement with Qatar on a state-to-state basis as well as float tenders for LNG import through competitive bidding, sources say.

The cabinet, in a meeting, gave its seal of approval to the LNG services agreement signed between Sui Southern Gas Company (SSGC) and ETPL, paving the way for gas purchase from Qatar.

According to officials, a Pakistani delegation will visit Doha soon to discuss the LNG price. Officials of the petroleum ministry have suggested that a market survey should be conducted to assess LNG prices in the world market before flying to Qatar. This could ensure a best possible deal for the country.

Earlier, Inter State Gas Systems (ISGS), a state-owned company formed to deal with gas import projects, and SSGC had made efforts to implement the LNG terminal deal within a six-month period.

However, the previous government had failed to do so during its entire tenure of five years.

The petroleum ministry also supported the gas companies in reaching the LNG deal with ETPL, a pilot project that would open Pakistan’s LNG market for international players, officials said.

During talks in Islamabad in January this year, Qatar had reportedly offered to revise the price downward for LNG export in a proposed government-to-government arrangement that would help ease energy shortages.

These preliminary talks were held between a delegation of Qatargas comprising Abdullah Ahmad al-Hussaini and Hamad Abdul Aziz al-Mahanadi and senior officials of the Ministry of Petroleum and Natural Resources, ISGS, SSGC and Pakistan State Oil.

Earlier, during meetings with officials of the previous PPP-led government, Qatar set LNG price at 14.7% of Brent crude oil rate when it was hovering around $110 per barrel in the international market.

Later, Doha pushed the price down to $17.437 per million metric British thermal units (mmbtu), a 0.5% discount over the previous rate of $18.002 per mmbtu for the 20-year lifetime of the project.

The price did not cover capital cost of LNG terminal and its charges, import expenses, re-gasification, wastage and shipping costs. The additional costs will add about $2.084 per mmbtu to the quoted price.

Pakistan was eager to buy 200mn cubic feet of LNG per day (mmcfd), which would be re-gasified at the terminal being set up at the Port Qasim and later injected into the system. By 2015, the volume will be increased up to 400 mmcfd.

Pakistan is interested in importing two billion cubic feet per day in the next two-and-a-half years.

According to an official, the Qatari delegation assured the Pakistani side that they had enough gas, but they did not commit any volume.