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Thursday, 20 February 2014

India-Qatar LNG deal at $10-12 poses challenge to Pakistan



Pakistan to respond on Tuesday at Doha meeting
 
 
Khalid MustafaMonday, February 17, 2014
From Print Edition
 
 
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ISLAMABAD: India has set a benchmark of LNG price from Qatar in the region at $10-12 per MMBTU posing an enormous challenge to Pakistani authorities.

According to Dr Miftah Ismail, Chairman Board of Investment who is also chairman of board of directors of Sui Southern, as per existing international price, the LNG price from Qatar will hover at $17 per MMBTU for Pakistan. After adding other charges it will hover at $18.

Dr Miftah said if the LNG is provided to power houses the sales tax will be re-adjusted. So the cost of LNG price because of GST will not increase.

When his attention was drawn towards the fact that India is importing LNG from Qatar at $10-12 per MMBTU as mentioned in the letter of energy expert Arshad H Abbasi associated with SDPI written to Prime Minister Nawaz Sharif, Dr Miftah said: “I assure that this government will get a better deal with Qatar and we will also look into the Qatar-India deal prior to advancing on LNG deal.”

However, independent sources said that the government has made up its mind to make the delivered cost of imported LNG from Qatar to end consumers at $20 MMBTU which will surely be uneconomical.

Top official of the Ministry of Petroleum and Natural Resources Naeem Malik when contacted said that no price for LNG from Qatar has been so far negotiated.So far, Pakistan has received the draft agreements from Qatar which are being examined by Pakistan’s relevant authorities. Another official said that the LNG price will be settled not at ministry level, but also at top leadership level of both the countries.

Qatar has sought a LNG supply contract for a period of 15 years extendable for to five years with no price reopener. The country wants a penalty of $200 million for termination of the agreement at any stage, reveals a copy of the HoA (Heads of Agreements) made available with The News.

Doha also wants the price to be fixed as a percentage of Brent, it shows. Agreeing to a fixed Brent rate for 15 years will be like mortgaging Pakistan’s future generations.The officials said that the government was committing a sovereign guarantee to cover the obligations under the agreement. This is against the LNG policy, they added.

Pakistan is likely to give its response to Qatar to the draft agreement on February 18 and will ask Doha to do away with the condition of no price opener in LNG supply agreement for 15 years that Doha has suggested.

The Joint Ministerial conference between Pakistan and Qatar will be held in Doha. Managing director of PSO and top officials of PPL (Pakistan Petroleum Limited) and senior officials of the ministry would accompany Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi.

Meanwhile, the letter written by Arshad H Abbasi to prime minister, eminent energy experts associated with SDPI mentions that India has already set the benchmark in pricing in this region, having negotiated a landing price of LNG of 10.5/MMBTU from the USA.

Similarly, looking at India’s LNG price from Qatar between the time period of October 2012 to July 2013, it has ranged between $10-12/MMBTU, and the price that did not rise to more than $11/MMBTU in 2013.

To avoid litigation in the future, it may be wiser if Pakistan renegotiates the prices in advance, especially because base price and price index, once inked in the contract are subject to little or no change. Moreover, there must be a price review clause in the agreement after every year.


 

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