Pakistan

Pakistan’s law ministry wants fresh tender for LNG import With gas shortfalls estimated to double to more than 2.5 billion cubic feet per day this winter, the law ministry has put a spanner in the government’s plans to import liquefied natural gas (LNG) through a consortium of European companies and has sought re-tendering of the entire project. A senior government official told Dawn on Tuesday that the law ministry’s observation, if accepted, would practically delay the project’s implementation by almost a year and yet it would remain uncertain if Pakistan would be able to secure LNG supplies from Qatar or the international market. “The reopening of the process will result not only in loss of time but the favourable LNG prices locked in under the existing deal are unlikely to be secured again. That will mean massive gas and energy shortages at least for four to five years,” he said. He said that it would badly affect an already battered investment climate in the country and scare away quality investors. The official said the adverse interpretation of the Supreme Court’s orders had come from the law ministry even though the fact that the prime minister had cleared the contract award to 4Gas and GDF Suez after the court decision and had referred it the Economic Coordination Committee of the cabinet for formal approval. He said the matter would again be taken up with the prime minister and the ECC to go ahead with the project even if it required a prime ministerial waiver on minor procedural lapses in the larger interest of the nation and energy security. In petroleum ministry’s view the apex court had not issued any adverse ruling against the project implementation and had desired the prime minister to review the entire situation and then take a prudent decision. He said the alleged $1 billion loss to the economy as a result of LNG contract was not proved before the court. “In view of the importance of the matter, will it be possible that the petroleum ministry put up a new summary before the ECC for considering the case of 4Gas, a Holland-based consortium, for the Mashal LNG project and on the basis of the same a fresh decision be taken for awarding the contract to parties which were declared qualified by the consultants, potent and partners,” the court said in its order. At a July 21 meeting, the ECC had sought the law ministry’s opinion in the light of apex court’s judgement before it could formally allow 3.75 million tons of LNG import from Qatar through the 4Gas and the GDF Suez on a long-term 20-year contract so as to start the process for short-term import contracts. The project was held in abeyance in April on the intervention of the Supreme Court. The petroleum ministry had proposed to the ECC that the government should sign a contract with 4Gas for setting up a port terminal who should sign a separate back-to-back agreement with GDF Suez for supply of LNG for 20 years at prices finalised by the price negotiations committee comprising various government officials.
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Pakistan

In June this year, the prime minister was given a presentation on the project, its benefits to the national economy owing to its competitive rates and widening energy shortfalls and its ramifications for investor confidence. The prime minister had given approval to awarding the contract to the companies already selected by the petroleum ministry and a price negotiation committee comprising representatives of the ministries of finance, planning and petroleum. After detailed consultations with the petroleum ministry, the prime minister had agreed the Pakistan Mashal LNG project was crucial to meeting the country’s gas shortfalls and that it would not be advisable to waste more time by restarting the entire process. It was also noted that the prices finalised with the 4Gas and GDF Suez for import of LNG were very competitive and should not be reopened. “If the process is started afresh, the government will have to pay more,” the official said. At the same time, the prime minister had decided to give a fresh opportunity to other parties for the import of additional quantities of LNG for short and medium terms, without affecting the Mashal project. In February, the government selected the GDF Suez of France for import of 3.75 million tons of LNG per annum for up to 20 years. The price of LNG to be imported from Qatar during the first six years was to be $1.8 billon lower than the rates offered by its competitor, Shell. The import price was around $9.3 per MMBtu if calculated at crude price of $70 a barrel. The official said the Mashal LNG was an integrated project and GDF Suez’s name was proposed by 4Gas because of its ability to ensure uninterrupted gas supplies. The project approved by the ECC allowed LNG import of 2.75 million tons per annum by the GDF Suez for six years at a rate of 3.95 per cent Brent plus 75 per cent maximum of Henry Hub-National Balancing Point formula plus $1.58 per MMBtu. It had also approved import of the remaining quantity of LNG by the GDF Suez for long-term supplies at 15.2 per cent of Brent plus $0.5 per MMBtu for 20 years subject to further price negotiations. The long-term price was to be for 10 years and renegotiable for a second 10-year term. Official estimates suggest the energy crisis would worsen this winter as the gas shortfall is feared to be in the region of two billion cubic feet a day (BCFD), despite liquefied natural gas (LNG) imports planned over the next few months. The gas shortfall could go up to three BCFD next year if the LNG project is not implemented now. The plan to import gas from Iran through a pipeline would, at best, materialise in four to five years. The demand and supply estimates presented by the Interstate Gas Company — a subsidiary of the petroleum
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Pakistan

ministry — suggested that the gas shortfalls would increase by more than 300 per cent to 6.5 BCFD by 2020. The projections imply that while the gas demand would maintain a steady increase over 10 years — from 4.8 BCFD now to 8.6 BCFD in 2020 — the supplies would register a further decline from four BCFD this year to 2.11 BCFD by 2020.
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