Pakistan in talks to import $1.5b gas from Qatar

Pakistan in talks to import $1.5b gas from Qatar

Pakistan is in talks to import liquefied natural gas (LNG) from Qatar, a minister said Wednesday, as the country grapples with a chronic energy shortage.


Petroleum minister Shahid Khaqan Abbasi confirmed talks were under way with the Gulf state, but said he “cannot comment on… details at this time as it is under negotiation”.

A report in the Wall Street Journal on Wednesday said the deal would be worth $1.5 billion annually and quoted officials as saying the agreement could be finalised by March.

Pakistan has faced a severe energy crisis since 2006, brought about largely by “circular debt” —  the dual effect of the government setting low electricity prices and of customers failing to pay bills.

The government of Prime Minister Nawaz Sharif made solving the energy crisis a key campaign pledge, but has so far failed to alleviate the problem. Increasing oil supplies could impact on the country’s fiscal deficit target of 4.5 per cent.

The country underwent a severe fuel shortage last month when the state oil company slashed imports because banks regused to extend it more credit.

Pakistan has historically depended on its own natural gasfields which have been depleting in recent years. The deal would mark the first time Pakistan has imported the commodity.

Nicholas Browne, a senior manager at energy consultancy Wood Mackenzie, said that typical pricing for Qatari LNG would be 14 to 15 per cent of the price of oil.

The deal with Qatar would provide supplies over 15 years, Pakistani officials say. Pakistan is looking to import 3 million tonnes of LNG a year, beginning this year, with much or all of that coming from Qatar.

The country’s overall LNG imports are expected to rise to around 7 million tonnes annually within three years. It isn’t clear as yet how much of that higher total would be provided by Qatar. Importing 3 million tonnes of LNG would cost around $1.5 billion annually, or some $22.5 billion over 15 years, given current global oil and gas prices, analysts say. That cost will fluctuate with the price of oil, which is also used to price LNG.

The Pakistani conglomerate Engro has built a terminal to import LNG at Port Qasim, on the edge of the southern city of Karachi, set to become operational at the end of March, officials say. Bidding is now under way to construct a second LNG terminal at Port Qasim.

Pakistani officials have been negotiating for months with state-owned Qatar Gas. The government of Qatar and Qatar Gas didn’t respond to requests for comment.

Pakistan’s electricity crisis has been caused partly by its reliance on importing furnace oil and diesel to fire its power stations, both relatively expensive fuels that will be replaced by the LNG. “LNG is more efficient and cleaner for the environment than the alternatives,” Abbasi said. “This is a major shift in our energy mix.”

According to Abbasi, LNG imports of 3 million tons would yield cost savings worth an annual $300 million. By using LNG, Pakistan will be able to between 7 per cent and 9 per cent more power, as a result of its greater efficiency and by bringing currently dormant gas-fired power stations back to work, Abbasi said.

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