Pakistan seeks Qatar gas on deferred payment
Amid severe energy crunch and unprecedentedly expensive fuel imports, Pakistan is seeking more gas imports on deferred payments from Qatar, which is irritated by roadblocks to its infrastructure investment plans, particularly in import terminals.
Authorities in Islamabad are engaging with Qatar at different levels to ramp up Liquefied Natural Gas (LNG) supplies to Pakistan to make up for shortage of four to five cargoes (about 400-500 million cubic feet of gas per day) every month.
At almost every engagement, the other side wants to hear an update on the removal of hitches to its plans to set up a merchant LNG terminal near Karachi.
The government has failed in last three attempts over the past couple of weeks to secure even a single cargo for July from the spot market as whatever quantities are available in the spot or otherwise are herded by the Unites States towards Europe suffering energy shortages amid the Russia-Ukraine war and ready to pick every molecule at any cost.
Doha irritated over roadblocks to its infrastructure investment plans
The single bid again from Qatar at $40 per million British thermal units (mmBtu) for a July delivery was too expensive to be accepted against Qatar’s long-term contract price of $11-14. For the next few months, it looks highly unlikely that the government can use its own capacity as sport price of LNG is not viable.
Informed sources said Minister of State for Petroleum Dr Musadik Malik visited Qatar a few weeks ago for additional LNG quantities. When approached, he chose not to comment on Qatar specifics but said the government was tapping all avenues to see how additional molecules are secured to meet needs of the local industry and the people at competitive costs.
He said various pricing models were in his mind, but the real challenge was the availability of additional energy quantities. He said the government would encourage private investment for competition and end monopolies. “We would not like to see a few faces in every field,” he said.
The sources said the Qatari ambassador in Islamabad also recently called on Prime Minister Shehbaz Sharif and had a follow-up session with Dr Malik to convey that Qatar Energy was getting all the wrong vibes about its LNG terminal.
However, it is not only Qatar’s Energas but also Mitsubishi’s Tabeer Energy that have been running around with licences for LNG terminals, marketing and sales without any success on signing of pipeline capacity.
Informed sources said not only the gas companies but regulatory bodies and relevant ministries had been delaying the contract signing for pipeline capacity or providing third party access to two upcoming merchant terminals — private projects without government guarantee for LNG sales and purchases with private sectors on commercial terms.
They have even received threats that their soon-expiring licences would not be renewed. In the meanwhile, options for construction of new terminals for Pakistan many be diminishing as European clients rush for additional LNG processing capacity.
Dr Malik again wrote to Qatar that the government of Pakistan and its people appreciated Doha for its continued support, particularly in the supply of LNG under mutually beneficial long-term contracts. He reiterated that Pakistan’s “desire to enhance the number of cargoes of LNG from Qatar under the two existing long term sale purchase agreements, on deferred payments” and reassured that Pakistan “government is also diligently working to do away with the stumbling blocks relating to third party access which will accelerate the process of investment by Qatar Energy in infrastructure development for LNG import”.
The petroleum minister said Islamabad realised the limitations on account of the current turmoil in the energy markets but expected “a positive response” from Qatar for additional LNG cargoes that would further strengthen bilateral friendship.
Informed sources said Qatar Petroleum believed that merchant LNG terminals were being road blocked to create space for expansion of existing LNG terminals developed with government guarantees.
The two new private licencees — Qatar’s Energas and Japan’s Tabeer — were particularly perturbed by a narrative at a recent Turnaround Conference of the Planning Commission about possible inability of Energas and Tabeer to come up with new terminals and hence expansion of existing terminals after withdrawal of international arbitration and local accountability cases. Energas and Tabeer were not invited to the conference.
The two existing terminals were awarded through a tender process in which the entire capacity of the terminal and is associated infrastructure was for the sole use of the government. The terminal operators were given a guaranteed rate of return on the basis of roughly $100 million per annum for the next 15 years.
As part of the contacts, the government had the right to provide access to third parties through its own quota for the purpose of reducing its financial exposure. The existing terminals, however, now want to increase throughput capacity (LNG volumes) at additional charge from new customers, on top of over and above the guaranteed payments from the government. This would also mean reduced storage and increased throughput on the government capacity.
Officials said such an arrangement could entail legal questions and would need the tender process to be amended. Also, the Sui gas companies — the sole distributors of gas — would have to agree to waive their rights on storage and berthing and throughput containment to accommodate third parties.
Already, the existing six cargo throughputs per month from a 170,000 cubic metres of storage is already well above global standards with a significant exposure on the guaranteed LNG long-term contracts from Qatar.
Tabeer and Energas are seeking to build new terminals for their own consumption and their private clients and at their own private industry risk unlike $100 million per annum guaranteed for the first two terminals.
Both have already received the go-ahead from cabinet and its other forums to utilise the pipeline capacities but Sui companies have still not executed contracts despite strict reminders from the energy ministry and the regulator, Ogra.
Qatar has yet again asked Islamabad that it wants to invest in Pakistan to allow its infrastructure to remain feasible with backup supplies. Without such infrastructure, long-term contracts may be at risk as seen in Europe in recent months where because of low storage, LNG cargoes were either stranded or sold to other markets at significant discounts to buyers.
Doha may not commit additional long-term contracts for the consideration that the value chain in Pakistan was unable to accommodate more than 10 long-term cargoes per month on the two terminals.