The petroleum ministry’s attempt to dispatch a floating storage unit for a second refill of liquefied natural gas (LNG) from Qatar has been stopped by customs authorities over tax payment issues. LNG continues to be controversial, and little scandals and catfights continue to surface over the issue. The petroleum sector authorities anticipated about seven days of suspension of LNG supply but the gap was now increasing. This means the government will have to keep paying $272,000 capacity charges/penalties daily to the terminal operator — Engro Elengy Terminal Limited — without getting any gas quantities into the system! Additionally, Pakistan had to send its own storage container, as Qatargas declined to dispatch its Q-Flex vessels due to its concerns over navigational issues. There are outstanding payment issues between Engro and PSO and this is just the tip of the iceberg. The authorities have also not been able to put in place any transportation arrangements, capacity allocations, profit margins for the LNG import mechanism.

The LNG import has been a contentious issue from the start. First with the secrecy over the pricing, and now the revelation that LNG is going to be more expensive than furnace oil. With the government agencies causing transport delays, the gas will become even more uneconomical. The decision to import LNG included a major policy shift to impose a 5pc tax on the import of furnace oil so that the imported LNG remained cheaper artificially.

It feels like Nandipur power project is happening all over again… the government is allowing another expensive deal to fall apart. After being pipelined at Karachi, the cost of LNG will be around $14/Mmbtu. This does not include any kind of taxation yet. If it’s used in CNG, which it now is, it will cost around Rs.75/kg without tax. This kind of import and infrastructure development will cause a fall in foreign exchange. The government cannot tax it because of its already higher prices. Why then? Why can’t our economic managers ever get us a good deal? Is it the desire for kickbacks and making a quick buck under the table? The petroleum sector and the energy sector keep getting away with one disappointment after another.