ISLAMABAD: Pakistan is considering to request Qatar to reduce its liquefied natural gas (LNG) supplies under a ‘take or pay’ long-term contract as its energy demand tumbles amid an economic slowdown.
According to media, the proposal for fresh talks with Qatar had come up for discussion at a meeting of the Economic Coordination Committee (ECC) of the cabinet on November 28 as part of risk mitigation on account of privatisation of two LNG-based 2,650MW power plants of National Power Parks Management Company (NPPMC) — Haveli Bahadur Shah and Balloki in Punjab.
The proposal to take up the challenge with Qatar was floated by Dr Abdul Hafeez Shaikh, Adviser to the Prime Minister on Finance, according to sources in the petroleum ministry.
Nadeem Babar, Special Adviser to the PM on Petroleum, informed the ECC that an earlier attempt at the highest level for reduction in LNG price was not acceptable to Qatar. He recalled that during a visit of Prime Minister Imran Khan to Doha earlier this year, Qatar was requested by then finance minister Asad Umar to reduce the price of LNG being supplied to Pakistan (at 13.37pc of Brent) under a 15-year contract. Move part of risk mitigation on account of two LNG-based power plants’ privatisation
Babar reported that Qatari authorities had explained point blank that price reduction was out of the question, given its 26 similar agreements with other countries. However, they were ready to consider any other idea to minimise Pakistan’s loss.
Two options were thus considered, including Qatar’s foreign exchange deposits in Pakistan’s banks and supply of additional LNG quantities at cheaper rates.
One of the options — additional LNG supply — was struck down by then petroleum minister Ghulam Sarwar Khan.
Dr Shaikh advised the petroleum division to take up with Qatar fresh options such as diversion of contracted LNG supplies and Pakistan would be ready to absorb the price differential.
The power division had proposed exempting the two power plants from 66pc guaranteed LNG off-take to facilitate their privatisation. It was reported to the ECC that an additional cumulative impact of about Rs471bn was estimated on the basket price of power due to the guaranteed off-take of 66pc up to 2025 on account of dispatch of these plants beyond the principle of economic merit order shall be allowed as subsidy to private sector consumers.