Algeria, Qatar want to supply LNG, but we just won’t let them do it!

The plans to expedite Liquefied Natural Gas (LNG) imports on government-to-government (G2G) basis seems to have fizzled out due to the disinterest and differences between members of the ministerial sub-committee formed by the Economic Coordination Committee of the Cabinet (ECC). An official source said that in total three meetings of the committee were held. The convener of the committee and minister for IT Raja Pervez Ashraf has shown no interest in attending the meetings,except for the first one.Even the former minister for water and power Syed Naveed Qamar, special advisor to the prime minister on water and agriculture Kamal Majeed Ullah skipped the third meeting.
The committee was to discuss LNG imports on G2G basis from Qatar and Algeria but even before it could engage in a meaningful discussion, the finance ministry said that it had no funds available to provide any kind of sovereign guarantee as required by the exporting countries for the project.
Pakistan is faced with a severe gas shortage, exceeding two billion cubic feet per day (bcfd) as the local production is unable to keep pace with the requirements of the country. Petroleum ministry is stressing upon the need to import LNG to mitigate the crisis. Imported LNG will be received, stored, re-gasified and delivered through connecting pipelines to the existing transmission pipeline network as Re-gasified LNG (RLNG). The RLNG price will be factored in the Weighted Average Cost of Gas (WACOG). Algeria and Qatar are both interested in supplying LNG to Pakistan, provided a deal is signed on a government to government basis for long term supply contract. An MoU has been signed with Qatar and they have provided a term sheet subject to negotiation. Qatar has also required guarantees by a satisfactory credit support and an acceptable performance guarantee. The ministry of finance showed reluctance to provide any kind of guarantee for LNG imports. Petroleum ministry argues that it is not possible since the exporting countries want a long term agreement backed by sovereign guarantee for a G2G basis deal. The plans to import LNG on G2G basis was proposed after the private sector failed to find buyers from the private sector for the commodity and sought sovereign guarantee or long term purchase agreements for the state owned gas utility companies.
In May last year, the government invited expression of interest from private sector companies interested in capacity allocation and willing to develop their own LNG FSRU, arranging their own supply of LNG with their own buyers of RLNG. Three companies were given construction licenses by OGRA for setting up LNG terminals and they were allocated capacities in the pipeline network. However, the establishment of buyer-dealer relationship between importers and users of LNG emerged as the main impediment to the project implementation due to huge circular debt.
Petroleum Ministry floated another proposal under which two companies could be given permission to import LNG on a deal to be signed on G2G basis. It was proposed that the base load volume of RLNG will be 800 mmcfd, spread over two separate LNG developers, 400 mmcfd each, at delivery point under ten years contractual arrangement. During the second meeting on May 21, a heated argument took place between the special advisor to prime minister on water and agriculture Kamal Majeed Ullah and petroleum minister Dr Asim Hussain over which port to be used for LNG imports. Advisor was of the opinion that the conversion of the Progas terminal for LNG imports was not feasible as the Port Qasim channel was narrow and under heavy traffic, incase of any incident the channel could be blocked causing disruption in all kind of supplies.
He suggested using Gwadar Port for LNG imports. However, the petroleum minister termed Port Qasim ideal for immediately importing LNG and supplying it into the national gas transmission network. The Advisor stuck to his argument terming Gwadar port more viable for LNG imports and claimed that the required infrastructure could be developed on urgent basis. When the petroleum minister insisted on his arguments, the advisor left the meeting in protest. The source said that as the convener Raja Pervez Ashraf, Syed Naveed Qamar and Kamal Majeed Ullah were not interested in attending the meetings of the sub-committee, the matter seemed to have fizzled out and the petroleum ministry will again have to approach ECC for further directions.