ISLAMABAD: Petroleum and Natural Resources Minister Shahid Khaqan Abbasi left for Qatar on Tuesday in a crucial visit during which he would hold talks on supply of liquefied natural gas (LNG) to meet Pakistan’s pressing energy needs, officials say.
HunzaNewsDecember 3rd, 2014.
His trip comes soon after Pakistan State Oil (PSO) scrapped a tender for LNG supply, a step that strengthened Qatar’s position in price negotiations and gave it virtual monopoly over gas export to Pakistan.
The PSO tender would have set a benchmark and provided an opportunity to negotiate a competitive price with Qatar, but the cancellation of bids on Friday last week spoiled such plans.
“LNG purchase in a competitive way would have provided a good benchmark for comparison between the price sought by Qatar and Malaysia’s oil and gas firm Petronas,” an official said.
Earlier, Pakistan had stalled negotiations with Doha until a price was accepted through the award of PSO tender. However, after keeping the Expressions of Interest submitted by LNG suppliers for six months without making any progress, PSO cancelled the tender, a clear indication that the company lacked the capability and experience required for handling gas imports.
Now, the petroleum minister has left for Doha to kick-start talks again. Punjab Chief Minister Shahbaz Sharif is already there to facilitate and give support to the process with a message from Prime Minister Nawaz Sharif “to show some flexibility in agreeing on the LNG price”, according to officials.
“The scrapping of the tender confirms market apprehensions that the government since the beginning was eager to enter into a long-term deal with Qatar Gas and other LNG purchase moves were mere eyewash,” a market player said.
On the other hand, the cancellation of the tender has sent signals to the international market how serious the government is in its plan to import LNG to address the energy challenges faced by the country.
However, the delay would have serious implications for Sui Southern Gas Company (SSGC) which could go bankrupt because of payment of $300,000 per day in capacity charges to Elengy Terminal Pakistan Limited (ETPL) even if gas is not imported.
Some of the board members of SSGC, being aware of the threat, were reluctant to give their backing to a standby letter of credit worth $50 million in favour of ETPL, but were persuaded to do so at a sitting in Islamabad attended by the petroleum secretary prior to the board meeting.
The final decision of the SSGC board was not unanimous as nine members voted for and three voted against the proposal as for them the country’s interest got priority over individuals.
The steps taken by the government so far point to the hurdles the country faces as a commodity considered vital for economic growth is within reach but is inaccessible because of the flawed course of action.