The government is planning to establish 100 percent government owned company to undertake the construction of second Liquefied Natural Gas (LNG) terminal project after the first attempt to build it through private company has failed.

“The government has not abandoned the project of LNG terminal-II, the government will form a government owned company and a summary in this regard will be moved to ECC for approval,” said the federal minister for petroleum and natural resources while briefing media regarding the LNG import and its progress.

The government has put on hold the development of the terminal-II project for the imported Liquefied Natural Gas (LNG), after the lowest bidder went in litigation, against the government decision of rejecting some of its documents for having ambiguity. However, the Sindh High Court (SHC) has maintained the government decision.

Now the company has challenged the decision of the High Court in the Supreme Court but the government is committed to its initial plan of the building new terminal, the minister said adding the government will invite fresh tender for the project.

Pakistan, an energy-hungry country is gradually increasing its reliance on imported Liquefied Natural Gas (LNG) and is enjoying lowest rate on gas import from Qatar and its price differential will save around Rs100 billion of the economy.

“As our gas fields are depleting, and in future even in housing you will need imported gas. Only domestic based gas can compete with LNG. On annual basis, LNG is cheaper than Iran-Pakistan (IP) and Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline projects. In the face of depleting natural gas the only cheaper alternative is LNG and replacing diesel-based power plants with LNG will save Rs 100 billion a year for national kitty, the minister maintained.

In the existing available energy resources nothing is compatible with the LNG; even it is compatible with the new prices of new discovery of gas,” the minister maintained.

Almost all the issues that were creating hurdles in the agreement in the LNG agreement have been resolved. “Only the issues related to price mechanisms and Standby Letter of Credit (SBLC) has yet to resolve but we are hopeful to sort it out by the first week of October” the minister added.

Earlier the Qatar government was asking the guarantee of $750 million which was later reduced to $450 million and now has been further relaxed as now the Qatar gas is demanding the deposit equal to the price of two cargos.

Two years ago the industries were at standstill as there was no enough gas available for the fertilizers sector, power plants and other industries. Due to the import of LNG majority of fertilizers units and power have started working.

Since March 26, 2015 when the LNG import started into the country, 10 ships have been imported so far and till March 26, 2016, we have to bring 15 more ships under the contract. However, if we increase the number of ships the tolling charges will reduce, so we target to import around total 30 ships this year. The import price per tone is less than $8, the minister informed

The Federal Minister said that around 600 megawatt RLNG–based electricity has been added to the national grid. RLNG-based power projects of 3600 megawatts are in advance stages and will be able to start adding energy into the system by summer 2017. It is lowest cost energy and its efficiency will be 62.5 percent while in Muzafargarh and Jamshoro it is around 30 percent.

For the last one and a half-year, we are negotiating a Sale-Purchase agreement [SPA] with the Qatar government, but we await the Oil and Gas Regulatory Authority (OGRA) decision of determination of tolling of the Sui Northern Gas Pipeline Ltd (SNGPL) and Sui Southern Gas Company Limited (SSGCL). Both the gas utilities are demanding 52 cents and 28 cent/mmbtu respectively.

In entire world, the LNG purchases are always negotiable and the government can also negotiate the lower price of LNG, however the PIPRA rules have tied our hands. “If you are allowed to participate and play in the market you can get good price” the minister claimed. The prices of LNG are ranging from 11.2-17.2 percent of Brent Crude Oil and Pakistan can get a deal up to 13.5 percent of Brent.

However the minister said that the main thing in LNG business is not the price you get but the terms of agreement benefits you. “There are some companies which have offered the prices of 8 percent of the Brent but there is no guarantee of supply, which is the critical point in LNG business” the minister added. The foremost thing in LNG deal with Qatar is its stability in supply, short distance and availability, he maintained.

We have government to government agreement with the Qatar government, as both PSO and Qatar Gas is government owned, and at the moment Pakistan is enjoying the lowest rate in the region, which is used in electricity generation and also in CNG stations and others. It will save around Rs100 billion per annum of the economy after its price differential.

The government gave the contract to the Engro Corporation after a bidding process to build a Liquefied Natural Gas (LNG) terminal at Port Qasim. The company completed the project within in 11 months after spending $150 million as capital cost. It also took a floating storage re-gasification unit (FSRU) on lease which having the capacity to deliver 600 Million Cubic Feet per Day (MMCFD) of the commodity which will be injected into the system of Sui-Southern Gas Company (SSGC).

The minister said that there will be no differential in LNG price for any consumer. “SNGPL is charging $2.04 from the CNG sector for Unaccounted for Gas (UFG) loses,” the minister added.

Since March 26, the FSRU docked at Port Qasim that also brought around three billion cubic feet.

He said that in a recent meeting the Ministry of Petroleum offered textile industry of supplying non-stop power at 9 cents per unit in case the industry was stopping using natural gas, but the representatives of All Pakistan Textile Mills Association (APTMA) have declined to accept the government’s offer because gas was much cheaper and profitable for the textile units.

He said textile industry based Independent Power Plants (IIPs) were producing power at Rs 6 per unit through gas and they were selling the extra power to the government at higher rates.