ISLAMABAD

After approval of LNG import by Federal Cabinet in April this year, international players have become keen in the country’s first 2.25 $ billion per year gas import plan.

Among those, most noticeable overtures have been made by the United States of America. United States’s Energy Policy Program (EPP) in Pakistan has become more active in assisting the energy starved country not only in LNG terminal construction at Port Qasim Karachi but also in LNG operations, import, logistics and other technicalities.

Recently, EPP invited proposals from qualified consulting companies to provide services to Port Qasim authorities and related departments of the country for the implementation of LNG import terminal. EPP asked for technical support in monitoring and quality assurance related to construction of LNG terminal. It also asked for technical support in port development, logistics, operations, traffic, port charges, channel upgrading, infrastructure, implementation agreements and regulations.

In another development, Advance Engineering Associates International (AEAI), working under contract with USAID, to implement US energy policy programme in the country, invited applications for the LNG Business Management Intensive Training Programme.

In this programme, foreign staff will educate local staff in the field of LNG supply chain, markets, including identifying key players, producers, consumers, trading and quality. They will also be trained for LNG financing, commercial and charter party contracts, facility designing with a focus on development and operations of LNG facilities at ports with particular reference to marine, Offshore terminals and logistics. The last date set to file applications is September 01, 2014.

Sources believe that US interest in Pakistan’s LNG import project in not new; it just became more intense after the approval of the construction of the terminal. USAID documents strengthen this opinion.  According to EPP Procurement department document “EPP/C2/RFP/061”, EPP commenced support of Pakistan’s Fast Track LNG import project in 2012 on the directions of USAID. It says that aim of EPP support programme was to build Pakistan’s first LNG terminal.

Sources in Ministry of Petroleum have mix interpretations of US interest in country’s LNG market. Some believe that it is purely for strategic reasons. However, some are of the opinion that US along with strategic interest also wants US companies to benefit from the export of LNG to Pakistan.

According to sources, Pakistan is lobbying with United States to get LNG from US Companies but US is giving mix signals. It may be due to the reason that no US Company can provide Pakistan LNG immediately. Couple of months back, when a Pakistani delegation visited Washington in order to negotiate any possible deal on LNG, it was told that US cannot supply gas to Pakistan till 2030, as supplies were tight and US was already supplying to India, China, South Korea and Japan, while many other applications were pending.

Some believe that it was just a bargaining tactic from US to grab maximum prices and terms. They term Qatar’s recent reported disinterest to participate in Pakistan’s liquefied natural gas (LNG) supply tender, saying it is only interested in clinching a direct government-to-government deal, as the same strategy of getting a better bargain.

Interestingly, in a recent tender floated by PSO for the import of LNG, big energy giants including Royal Dutch Shell, British Petroleum and Mitsubishi have submitted their bids. This could be a reason that US diplomats now offer a softer gestation period for the import of gas from United States. “Presently, only one US company Cheniere Energy has received a licence to build its terminal in Sabine Pass, which will be completed in 2017. After completion it will have a capacity to export up to 2.76 billion cubic feet per day (bcfd), diplomatic sources told The Nation.

Diplomatic sources said that all natural gas production and LNG manufacturing in the United States is the endeavour of private enterprise, however US Department of Energy (DOE), grants import licence to country’s companies on FTA (free trade area) or Non FTA basis, and not on country basis.

“While granting a licence to non-FTA countries (like Pakistan), DOE ensures that the licence will not be detrimental to the public interest, and it also consider its economic effect on US market” , sources said, adding, “so far seven companies have been granted licences to export a total of up to 9.27 bcfd to non-FTA countries”. Although US stance on timeframe seems softer but on prices it is tougher.

“It is a misconception that LNG supply from companies in the United States will be cheaper than from other sources, or that LNG prices will drop substantially when US supply comes on line”, a US Diplomat said. After the announcement of government to import LNG to meet the prevailing energy crisis, there has been uproar from the opposition in the National Assembly over the prices.

Opposition politicians were of the view that Pakistan should wait as after the discovery of huge shale gas reserves in US, the prices of LNG would come down drastically, and the government should evaluate the future scenario before going into any long term agreement with any foreign country.

But sources in US Embassy differ from this perception. “LNG contract is long term commitment. US companies are already committed for next few years. Secondly, while LNG supply is growing, demand appears to be growing at least as fast, if not faster,” they argued, adding, “Recent tension with Russia over the Ukraine has raised the profile of LNG in Europe and regasification facilities are cheaper to build than liquefaction facilities”.  According to US perspective, LNG supplies are tight and are likely to remain tight for some years to come.

When US embassy was contacted to inquire about US interest in Pakistan’s LNG import project, the embassy spokesperson restricted to saying that US support Pakistani initiative to import LNG.

“Having an LNG import terminal and regasification facility is the first step for Pakistan to negotiate a supply contract. We are fully supportive of Pakistan’s efforts to increase its natural gas supply through LNG imports, regardless of where it receives its supply”, US spokesperson told The Nation.

LNG import is not a new idea, it has been under consideration since last many years. After coming in power, last year, PML-N government was quick to approve the project in a federal cabinet meeting in April this year.According to Ministry of Petroleum, LNG imports would cost Pakistan $2.25 billion a year, for 400 mmcfd gas, while the Engro’s terminal would be paid $100 million annually as tolling charges.

After the approval of OGRA, terminal construction is kicked off but supplier has yet to be finalised. Pakistan plans to receive its first LNG consignment by March 2015. LNG supply agreement is a long time contract. In rapidly changing dimensions of international LNG market, local analysts believe that getting a competitive or discounted price could be a difficult task for Pakistan but not impossible.