LNG investors force govt to provide level playing field

The government suffered a major embarrassment on Thursday when it was forced by the intending Liquefied Natural Gas (LNG) importers to desist from hurriedly converting the Liquefied Petroleum Gas (LPG) import terminal at the Port Qasim without due diligence and providing a guarantee for level playing field. Meeting with private sector: Top heads of three private sector companies, Global Energy Infrastructure, Engro Vopak and Pakistan Gasport held a meeting with the officials of the Ministry of Petroleum, Oil and Gas Regulatory Authority (OGRA) along with the representatives of the United States Agency for International Development (USAID). An informed source said that they sought clarification from the government on its intended LNG import from Qatar, and retrofitting at ProGas LPG import terminal to enable it to handle LNG imports. The terminal was purchased by the state owned SSGC to expedite LPG imports in the public sector.
They also expressed grave concern over the demand of $10 million guarantee upfront from OGRA, which they termed unjustified as they were to invest $300 million in LNG import terminal and $1 billion in trade finance. Public sector participation: They said the entry of public sector in LNG import would negatively affect their business plans as the government was not interested to buy gas from them and had asked them to find third party buyers. They proposed that the government should look into possibility of buying LNG from them if their prices were competitive with the Qatari LNG. They also opposed utilisation of LPG import terminal for LNG, as they pointed out that the terminal was on the main shipping channel and even a study conducted by Port Qasim Authority had termed construction of any LNG terminal a security risk. They said that even if government went ahead with its plans the international shippers would not enter the channel, as it was against the international standards. Secretary Petroleum, the source said was not aware of these issues and said that he would look into the matter to resolve it.
LNG imports from Qatar: Talking to reporters on Thursday Petroleum Minister Dr Asim Hussain said that the government would start LNG imports from Qatar and it would be injected in the national transmission network. He said 1300 mmcfd gas equivalent of LNG would be imported as the channel could not handle a ship carrying 500 mmcfd equivalent LNG. The minister said price of imported LNG will be included in the weighted average and consumers would have to pay higher price for gas. He said imports will start within next eight months. The current average consumer price for local gas supplies is $3.5 mmBTU as compared to LNG price of 18 mmBTU. This will significantly increase the domestic consumer price.
Bridging demand and supply gap: The minister said he was making efforts to bridge the demand and supply gap in gas supply through imports but OGRA was hindering his efforts. When asked who in OGRA was opposing his moves as all top officials of OGRA were very compliant of ministry’s policy decisions, he said tampering in the policy directives was done by the middle cadre officials who try to implement their own theories. Giving an example he said there was no condition of guarantee for LNG imports but some where from the middle it came up and now the investors were being forced to give a guarantee of $10 million upfront, even though they had to make complete investment on their own for importing and selling LNG.
A statement issued by the ministry said that while chairing a meeting with LNG importers, Secretary Petroleum Ejaz Chaudhry dispelled the impression that government was violating the LNG policy and emphasized that the import process would be based on merit and completely transparent. It was decided that a committee will be notified comprising of the representatives of the petroleum ministry, OGRA and representatives of LNG importing companies to look into the detailed process of LNG import and to resolve concerns of the importers. It was clarified that a separate Expression of Interest (EoI) would be advertised for LNG tolling. Secretary Petroleum chaired the meeting attended by representatives of OGRA, USAID and LNG importers.