LNG from Qatar: Govt going to import costly gas

[Contrarian]

The problem is two-fold.

First, we need to have infrastructure and somehow find a way to finance it.

Second, we need gas supply ASAP.

Both ways Pakistan has to compromise somewhere.

We need LNG terminal regardless.

Ofcourse. I was talking about short term solutions with least cost upfront.

 

[truthseeker2010]

We have really gone nuts..... instead of going for the efficient use of current production.... we are going for imports, which will be a BIG burden on our already bleeding reserves.... The govt should first focus on curtailing theft in the gas network at around 10-12% which i think will be highest in the world. Second they should stop giving gas to high inefficient genco's which waste more and produce less.... 50% of problem will be solved there and lastly they should ban CNG once and for all specially for public transport. This govt is no different from the last one.... I don't know what sort of people are there in the decision making...... I feel very sorry for **** people and really ashamed of myself as well.

 

[niaz]

Dr. Farrukh Saleem is a professional and I can vouch that his figure are in the ball park. But he is not in the Industry. I am still an Energy Consultant and thus in the industry for more than 40 years.

January forward spot prices in the East Asian region are $18.50 per million BTU. It is virtually impossible to get LNG on a new term contract at less than about $15 per million BTU FOB from anywhere in our region. No producer sells on permanent fixed price; FOB prices are linked to specific crude or a basket of crudes or to an international price publication such as Platt’s or ICIS market report.

Additionally, thus far Pakistan has no LNG receiving facility. An average on shore LNG degasification facility could cost as much as $500-600-million. Alternately, one could modify a 65,000 DWT LNG vessel (cost about $50-million) to do on-board degasification before discharge. All of this costs money which is recovered as higher DES ( Discharge ex ship) price.

Comparison with India is not fair. Japan & India are about the largest LNG importers in the world and have term contract going back more than 10 years and committed for 20 years at a time.

Gas prices normally peak in winter and as mentioned earlier spot prices are closer to $19-per million BTU for Jan 2014 delivery. Recently all the major buyers held a meeting in China to try to form a buying cartel. Pakistan is new buyer and here nearly all contracts end in Courts where decision takes years.

Qatar is the largest exporter of LNG in the Arab/Persian Gulf region. No other exporter has the surplus or the facilities compared to Qatar. In 2011 Qatar exported 77-miilion tons of LNG that equal to about 1.5 million barrels per day of crude. There are two parties in any contract, Qatar is no doubt asking a high price but if there is no other supplier, one has no choice. We have to understand that Pakistan is only a minor player in this game and will have to pay up if she needs LNG.

Having on hand experience for a very long time, I can tell you that wherever Gov’t are involved, you end up paying high prices. In my view Gov't have no business in import or export of any commodity. One still has to pay the market price; all Gov’t involvement does is to generate opportunities for the bureaucrats to make money which eventually end up as higher costs.

Finally, everyone must understand that Pakistan is severely short of gas “NOW”. Additional exploration and development takes years assuming you find the gas. We have not even started Fracking; even if we start right away it would be at least 3 years before we get anywhere.

Pakistanis have a simple choice; either continue as we are or pay up. Given what we have seen of the PML-N decision making, it appears that nothing would be done in a hurry anyway, thus in fact there is only one option, live without gas in the foreseeable future.

 

[niaz]

Yesterday I saw a discussion on PTV where Dr Farrukh Saleem and another gentleman debated with Shahid Khaqan Abbassi on Energy matters.

It came out that landed cost of Qatar LNG is about $16.50 per million BTU. This is in line with the prevailing market prices. It was agreed that near term solution to the gas crisis is only thru LNG import from Qatar.

Minister also discussed GOP thinking regarding TAPI& IPI pipelines as well as on Tight gas and Shale gas. The whole approach was realistic and pragmatic. I have to admit that after a long time I came across a Pakistani Minister of Petroleum who appears to be on the ball.

However proof of pudding is in the eating; let us see how words are translated into action.

 

[BATMAN]

No Dear The Solution Is To Price All LNG Imports With Henry Hub Indexation or Better Yet Spot Purchase From Henry Hub.Nov 2013 Prices Are $3.64/mmbtu Lower Than Our Sui Gas

Just Imagine If We Just Replace Our Furnace Oil Imports with Henry Hub Priced LNG Within an Year
Our BOP Savings Would Go Into Billions of Dollars and No IMF TO bug Us But Idiots In Oil and Gas Ministry Want to Import IP Pipleine Gas and LNG From Qatar with Prices Linked To Crude Oil Scnadalous I Tell You The Whole Oil and Gas Ministry Should Be Hanged For This

Unfortunately, some people are so hateful of Pakistan that they loose rational.
Thanks for putting them back in to their shorts.

.... WASTE OF TIME


ECONOMICAL ANSWER IS IRAN

GET GAS FROM IRAN
OPEN AUTO IMPORTS FROM IRAN INTO PAKISTAN FUEL EFFICIENT CARS NEW MODELS
OPEN RAILWAY ENGINE IMPORT FROM IRAN
OPEN PETROCHEMICAL PRODUCT LINE TO COME FROM IRAN

>Bring in Iranian Engineering companies to help build projects in Pakistan

Dude Pakistan has already emptied its forex reserves, in order to fund Indian transit and now you want Pakistan to take IMF loan to fund Iranian contractors and than generations of common Pakistani would be forced to pay interests for years to come!
Only enemies of Pakistan would support this idea, while pro Iranians always curse Nawaz Sharif more for being Arab friend rather than his incompetency.

 

[BATMAN]

Qatar Is Offering at $17 to $19 per mmbtu But November 2013 Henry Hub Spot Prices Are $3.64 per mmbtu.This Is What The Idiots In Our Oil and Gas Ministry Do Not Understand.As Far As I Know Sui Gas Is Priced At $4-5 per MMBTU.


No The Above Price Is A Death Sentence For Our Economy.We should Negotiate LNG and Imported Gas Prices Which Is Linked To Henry Hub Not To Crude Oil

Actually it is $3 / MBTU.
Lot of Pakistanis are loyal to Iran, they want Iran to charge us $20 for the same gas.

 

[VCheng]

The world is getting ready for more widespread use of LNG:

World's largest 'ship' bigger than Empire State Building launches - Telegraph

 

[niaz]

Do some members really think that staff at the Pakistan Ministry of Petroleum is made up of total idiots that they are willing to purchase LNG from Qatar at around $15/mm Btu FOB when anyone can buy gas futures at NYMEX at under $4/mm Btu FOB Henry Hub?

Please understand that “Henry Hub”is a distribution point on the natural gas pipeline system in Erath, Louisiana. This center is owned by Sabine Pipe Line Company, a subsidiary of Chevron. It interconnects with nine interstate and four intrastate pipelines.

The system has transportation capacity of 1.8 billion cft/day of natural gas. Due to its importance, it lends its name to the pricing point for natural gas futures contracts traded on the New York Mercantile Exchange(NYMEX) and the OTC swaps traded on Intercontinental Exchange (ICE).

Price is for natural gas not for LNG. Assuming you were to buy a futures contract of gas at $4/mm Btu at Nymex; say for Feb delivery. If you elect not settle on the last trading of January; you will be given a piece of paper which entitles you to draw ‘Natural Gas’ at the Henry Hub pipeline flange. Pray tell me how are you going to transport this gas to Pakistan?

First you will have to construct a gas liquefaction plant to convert the gas to ‘LNG’; only then you can transport the same to Karachi/Port Qasim. This could easily cost you another $10 per million Btu.

Additionally, one cubic foot of natural gas equals approx. 1,023 Btu. Pakistan needs 400 mmcft per day of LNG. One cft of LNG will provide about 634 cft of natural gas. This translates into roughly 2.4 million futures contract per day per month (each of 10,000-million Btu)

Usually most futures contract are used for speculation and ‘Hedging’ and are settled at the end of the month’s trading (It was Dec 27, 2013 for the last month). Once anyone regularly starts taking physical delivery of very large number of futures contracts which is approx. 22% of the total physical capacity of Henry Hub; gas futures prices will shoot up and it is possible that after first few months you could be paying double the current price. Therefore buying Nymex gas futures is not a feasible option.

Unless there is an alternative producer willing to link selling price with Henry Hub price, you cannot force the seller to do so. For Pakistan both Iran & Qatar are unwilling to accept this demand. Either we buy linked to Dubai crude or not at all.

Staff at the Petroleum Ministry may not be brightest of the guys but they do this job for earning a living. Therefore I humbly request Honourable Members to stop insulting the intelligence of other people by assuming that they couldn’t consider things which are most obvious

 

[Sugarcane]

OPEN AUTO IMPORTS FROM IRAN INTO PAKISTAN FUEL EFFICIENT CARS NEW MODELS

 

[Chak Bamu]

Excellent post as always @niaz sb. I could guess some of what you said, but I did not know details like you do. Some emotional posters are very outspoken in their criticisms. I hope they learn a thing or two from you.

What is your take on this deal sir? What should be our strategy at this point?

 

[niaz]

There are three stages in any decision making process. Understand Pakistan is currently short of about 400-million cft per day of natural gas. Only logical short term solution appears to be importation of LNG from Qatar.

Medium term strategy would be IP & TAPI pipelines. However no country can totally rely upon imported fuel for her long term strategy. Fuel/energy requirements grow at about 50% of the GDP growth. With increasing demand for fuel & gas, energy import bill could bankrupt Pakistan. Therefore long term planning must involve increased exploration for oil & gas, exploitation of tight gas & shale gas resources and last but not the least, reducing wastage by improving efficiency of the transmission system.

My personal opinion is that CNG use for cars is a gross misuse of our scarce gas resource and only came about because CNG is cheap compared to imported gasoline. Removing the price anomaly would resolve this problem.

All the advanced societies rely primarily on railways for mass transportation. Pakistan had a good railway system which has since been ruined thru mismanagement. In India, major cities such as Bombay & Delhi rely heavily on metro & surface trains for mass transit. Dubai, where money for petrol is no object for most of the residents, also has a good metro train network in operation.

Pakistan urgently needs to revive railways. Cheap & efficient railways for mass transit and goods movement would reduce the use of motor vehicles. In addition to reducing fuel import bill, this would also improve up the environment.

As posted earlier, Minister of Petroleum Shahid Khaqan Abbasi appears to be on the right track. However nothing will get done unless we resolve our terrorism & extremism problem. My main worry is that PMLN gov’t lacks the political will to tackle terrorists effectively. Chaudhry Nisar in particular is a spineless coward and totally incapable of tackling ruthless adversaries like TTP.

 

[AhsanAmin]

Staff at the Petroleum Ministry may not be brightest of the guys but they do this job for earning a living. Therefore I humbly request Honourable Members to stop insulting the intelligence of other people by assuming that they couldn’t consider things which are most obvious

I sincerely apologize for my remarks on the thread

Gas pipeline: Iranian firm offers to completely finance and construct Pakistan’s side | Page 3 | Pakistan Defence

Since I realized that similar oil-linked gas contracts were traded in several other Asian countries. I do not want to doubt the honesty of people who wrote the contract. We can all make mistakes of judgement especially when gas importers in other countries follow similar practices. But doubting their honesty would be probably wrong and a grave mistake in this case.

Since discussions on this issue have become interesting and will affect the future of all of us, I will try to keep myself aware of new developments and hopefully contribute in discussions.

 

[niaz]

Buyer would always like to pay as little as possible with the seller aiming to get the highest possible price and eventual price agreed is always a compromise. In other words, I would not buy LNG from Qatar if I can get it cheaper from anywhere else and Qatar would not sell if they can get better price from another buyer. Once you do a deal at a lower price; it becomes a reference point and all other buyers want the same. Therefore in most gov’t to gov’t deals, producer would not sell at sell at lower price but would give you softer payment terms or agree to defer payment.

Besides, size of business does make a difference. Countries and companies with large buying capacity carry more influence in negotiating price with the exporters. Pakistan is new in this game and does not yet have LNG receiving facility.

Pakistan is short of about 400-miilion cft gas per day. This translates into about 3-milion metric tons per year of LNG. I understand is the initial agreement is only for half of the quantity. Qatar produces about 80-million tons of LNG per year. Thus India with 20-million tons import requirement carries a lot more weight than Pakistan with only 1.5 -million tons. Additionally, oil market is volatile and neither buyer nor seller would agree to a fixed price. Prices are always linked to some kind of price index. Arab Gulf countries prefer linkage with Dubai crude prices. Besides, most term contracts have price renegotiating clause for review every 6 months or every year.

Incidentally, I came across a news item last year that Shell purchased all the LNG business including assets from Repsol (Spanish State oil Company) in an effort to dominate International LNG trade. This gives Shell the ability to buy cheap spot LNG cargoes world-wide and sell at it the time & place maximising profit.

 

[Fahad Khan 2]

.... WASTE OF TIME


ECONOMICAL ANSWER IS IRAN

GET GAS FROM IRAN
OPEN AUTO IMPORTS FROM IRAN INTO PAKISTAN FUEL EFFICIENT CARS NEW MODELS
OPEN RAILWAY ENGINE IMPORT FROM IRAN
OPEN PETROCHEMICAL PRODUCT LINE TO COME FROM IRAN

>Bring in Iranian Engineering companies to help build projects in Pakistan

Why not make our own car industry with help of China?? Japanese companies Toyota, Honda and Suzuki are screwing us with selling so expensive car...

 

[BATMAN]

There is always an element of corruption and kickbacks, as long democracy rules Pakistan.
Otherwise, Turkmenistan was the best option during Zardari era.