The government is considering setting up the ‘Pakistan LNG Limited’, a company with a mandate to immediately start the import process of the fuel through multiple options.
Earlier, only Pakistan State Oil (PSO) had the mandate to import LNG, which would be shifted to ‘Pakistan LNG Limited’ once it is formed.
The Ministry of Petroleum is seeking the approval of the Economic Coordination Committee (ECC) to set up the new company, said an official familiar with the development.
The Petroleum Ministry had proposed to the economic decision making body to form a subsidiary under the name of Pakistan LNG Limited, under Government Holding (Private) Limited (GHPL).
They also proposed the company to be mandated immediately to start the import process of LNG on a multiple-options basis to overcome the shortfall in gas supply.
The company would make arrangements for the procurement of LNG through the ‘open competitive bidding process’ or ‘government-to-government’ basis, under applicable rules including rules of the Public Procurement Regulatory Authority (PPRA).
Also, GHPL/Pakistan LNG Limited might hire a consultant for advising on different commercial and legal aspects for LNG imports.
As per international practices, LNG imports are secured through long-, short- and medium-term contracts as well as spot purchases through tenders or government-to-government arrangements.
At present, a long-term contract between PSO and Qatargas has been finalised and is expected to be executed shortly. In addition, PSO is also arranging spot cargoes on DES/FOB basis as per the approval given by the ECC in its meeting held on June 6, 2015.
However, the Ministry of Petroleum was of the view that an independent LNG company was required.
Pakistan is currently facing a severe shortage of gas, both for electricity generation plants and for general use by all sectors.
Domestic gas production of 4 billion cubic feet per day is unable to meet the country’s demand as supply-demand gap stands at 2 bcfd and is continuously rising. The shortage of energy is not only causing hardships to the common man, but inhibiting the economic growth of the country.
The ECC has authorised the Ministry of Petroleum to engage in negotiations with Qatargas on a government-to-government basis for importing LNG up to 500 mmcfd.
Accordingly, Pakistan State Oil (PSO) and Qatargas Operating Company Limited (QOCL) have been nominated by respective governments to negotiate the LNG Sales Purchase Agreement, which is expected to be signed shortly.
In the first year, it is expected that Qatargas would supply 1.5 million tons of LNG, which would later increase to 3 million tons per year from the second year onward.
Published in The Express Tribune, October 21st, 2015.
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