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LNG to be imported from Qatar at lowest possible price: Khaqan
ISLAMABAD: The National Assembly was assured on Friday that Liquefied Natural Gas (LNG) will be imported from Qatar at the lowest possible price.
Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi told the House during question hour that the government is currently negotiating the procurement of LNG, reported Radio Pakistan.
He said its import is likely to commence towards the end of the current year.
The minister said the price of LNG has not been negotiated yet and will be done so in a transparent manner, adding that the price of LNG will be kept 30 percent below the price of petroleum.
Speaking about the construction of the LNG terminal, the minister said its completion is expected by November this year,
In regard to the Pakistan-Iran gas pipeline project, the minister said gas cannot be imported from Iran till the sanctions are lifted on the country.
Abbasi said the 2012 Petroleum Policy has been amended by the present government to enhance exploration of oil and gas in Pakistan.
The minister said the government is exploring all avenues to remove the constraints in gas supply. He said the schedule for CNG stations will be reviewed based on factors such as the weather condition and reduction in consumption by the domestic sector.
Abbasi said Balochistan is being given priority in the supply of gas.
Despite difficulty in extending the network for the supply of gas to the entire province due to scattered population and a hilly terrain, 13 district headquarters and 25 tehsil headquarters have been connected with gas in the province.
LNG to be imported from Qatar at lowest possible price: Khaqan – The Express Tribune
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I doubt the parity the minister stated would comply with what he suggests as "transparent manner." I am not sure whether people are still linking gas prices to petroleum. We should peg it to Singapore gas prices or Indian gas prices otherwise I think some big fish will become far bigger fish by taking some bribe and deceiving people of Pakistan. I do see possibility of corruption here.
Singapore is emerging as a large trading hub for LNG and I am sure their prices would be very fair and we have to write a perfect agreement to import LNG without linking it to petroleum. We should rather follow Singapore rates of LNG. Here is an article from the Diplomat.
QUOTE:Singapore Emerges as LNG Trading Hub
An ambitious yet feasible program could have profound implications for the LNG market.
By Gabe Collins
September 17, 2013
In the commodity markets, positioning is often much more important than production. Singapore’s leadership clearly understands this, and by creating the Singapore LNG Corporation (SLNG), the city state is clearly leveraging its superior geographical and intellectual position to try and become Asia’s primary gas marketing hub. Asia accounted for 71% of the world’s estimated 236 million tons of LNG trade in 2012, according to the International Group of Liquefied Gas Importers.
The Singapore SLNG
SLNG, owned by the Energy Market Authority of Singapore, is the designated vehicle for Singapore’s gas trading aspirations and operates the first liquid natural gas (LNG) terminal in Asia capable of importing and re-exporting LNG from multiple suppliers. SLNG commissioned its inaugural LNG cargo in March 2013 from Qatar and the terminal, located on Jurong Island, begin commercial operations on May 7, 2013.
Singapore’s first objective in building an LNG terminal is to secure gas supplies for its own growing demand, and second, to become an LNG trading hub where substantial storage capacity enables buyers to purchase a wide range of cargo sizes. Managing these two objectives is difficult, since the terminal operator SLNG must balance the underlying long-term objectives of Singaporean gas consumers with the shorter term and more variable needs of trading customers. To help bridge this gap and ensure an underlying critical mass of supply, the EMA contracted British Gas to serve as an “aggregator” to help get the project underway.
In a nutshell, British Gas (BG) works on both the supply and demand sides of the market to ensure that the terminal has a “baseline” volume of LNG throughput committed that is sufficient to make operations economically viable. This requires substantial trading and market expertise, as well as ready access to a range of LNG supply sources – qualifications that BG meets via its LNG trading and marketing arms. The aggregator model also aims to make LNG storage more efficient by allowing cargoes to be sold out of a large general pool.
One of SLNG’s most important innovations is that it takes the gas that naturally “boils off” from LNG stored at -261 Fahrenheit and sells it to customers in Singapore. LNG traders then simply take their volumes from the portion of the stored gas that remains in a liquefied state. This policy keeps traders confident that they are capturing the full energy value of any cargo they bring into and sell out of Singapore’s LNG storage tanks. That confidence in turn facilitates the development of a more liquid trading market because storage terminals, buyers and sellers are aware they can now fully capture price differences and exploit arbitrage opportunities without bearing the costs of gas that boils off.
As such, market participants can now truly think in terms of gas molecules, rather than the old inflexible view of “specific cargoes held for specific customers.” Making the gas molecules fungible helps the terminal operator meet the smaller volume, shorter term demands of many trading customers. Fungible gas and active trading also captures additional economic value, since a US$1/million BTU increase in the price of natural gas means the value of gas stored in a 188,000 cubic meter SNLG storage tank would increase by US$4.5 million (assuming the tank is 90% full). Traders can now, with reduced risk, commission LNG cargoes from Singaporean tanks on short notice when, for instance, a Siberian cold snap heads toward China and South Korea and gas prices begin to rise.
Size and Sourcing
SLNG says its terminal will have an initial re-gasification capacity of 3.5 million tons per year (equal to roughly two weeks of gas consumption in Japan, the world’s largest consumer of LNG) and has the ability to expand this to 6.0 million tons per year or more if market conditions prove favorable.
Singapore LNG aims to source its supplies globally. As noted above, the terminal has handled cargo from Qatar and British Gas will also source LNG from projects in which it holds equity stakes, including Trinidad, Egypt, Nigeria and Equatorial Guinea, as well as its coal gas LNG project in Queensland, Australia, which is scheduled to come online in 2014.
Strategic Implications
The venture faces a number of significant challenges, but if it succeeds, in the emerging global LNG spot trading market, Singapore may be able to complement its existing outsize role in the Asian oil and refined products markets and become Asia’s premier natural gas trading hub as well.
First, the demand side. Among key markets for LNG spot and short-term cargoes traded out of Singapore, Japan and South Korea stand out as the highest potential near-term markets. Japan continues to grapple with the aftermath of the Fukushima nuclear disaster, which reduces the appeal of nuclear power and will continue to drive strong LNG demand that in turn creates a need for spot cargoes to keep gas-fired power plants humming during winter cold snaps and summer heat waves. Likewise, during the winter months South Korea often finds itself needing to source substantial supplies of LNG on the spot market.
Southeast Asian countries, in aggregate, are also emerging as a source of LNG demand. Indonesia and Malaysia are rapidly becoming net energy importers and by 2018, Indonesia, now the world’s third largest LNG exporter, may begin importing LNG for its own use. Thailand, meanwhile, plans to double its LNG import capacity to 10 million tons per year, and currently gets the majority of its supplies from the spot market. Singapore LNG is also located in advantageous proximity to the emerging Southeast Asian LNG importers.
Finally, Singapore LNG is well placed to trade LNG cargoes into China. Chinese gas demand is rising rapidly and importers have so far shown themselves willing to purchase spot LNG cargoes from across the globe, including Algeria, Angola, Russia and Qatar. The growth of spot LNG demand in China has been constrained thus far by heavy regulation of domestic gas pricing. However, as the Chinese government works to clean up the country’s air by stimulating natural gas demand and production from shale and other unconventional gas resources in China, higher prices will also likely help drive additional spot LNG imports into premium priced coastal markets.
On the supply side, successful operation of Singapore LNG’s aggregator trading terminal model will likely help undermine the LNG market’s traditional model of long-term contracts that link natural gas prices to the price of oil and oil products. Buyers welcome the prospect of this breakdown, since the shale gas revolution in North America is illustrating that greater unconventional gas production can more permanently support pricing gas against gas and making clean-burning gas a lower-cost energy source.
Qatar and Russia are likely to be the gas/LNG exporters most opposed to seeing gas priced independently of crude oil. Qatar sells a substantial volume of spot cargoes but clearly prefers a more stable long-term revenue stream over the potential revenue roller coaster that trading of spot cargoes entails. Russia, in particular, will face a tough road because in Europe, its core market, its gas would have to compete on price with gas from suppliers such as Algeria and Norway, which are located closer to customers and have lower transport costs.
In addition, Norwegian gas marketers have fully embraced the reality that they must find ways to sell their gas in a more competitive marketplace, while Gazprom’s marketing department refuses to adapt to the new reality of a more gas-rich world in which customers no longer have to accept inflated oil-indexed prices. If a European LNG trader can establish a facility like Singapore LNG’s aggregator-managed trading terminal and catalyze additional spot LNG trading in the massive EU gas market, Russian gas suppliers will be forced to either adopt a more flexible pricing regime, or lose market share.
The big supply side wild-cards will be shale gas exports from the U.S. and the emerging gas reserve holders in East Africa, such as Mozambique and Tanzania, whose huge offshore reserves and relatively small domestic markets could make them some of the world’s largest LNG exporters by 2025. LNG production plants in East Africa would be well-positioned to serve the Asian and European markets.
The key factor that remains to be seen is how much of the new LNG producers’ capacity might be allocated to spot and short-term sales, as opposed to the traditional long-term contract structure. U.S. gas exporters, who will have been steeped in the idea of a truly competitive natural gas market in which molecules from LNG and pipelines compete head to head, are likely to be much more comfortable with the idea of selling substantial gas volumes into a more short-term, trading-oriented marketplace.
Singapore LNG has introduced a creative and disruptive new LNG marketing idea that appears to have a very good chance of achieving commercial success. Greater market liquidity offers greater incentives for small and innovative players to enter the market and could ultimately make LNG a more widely used energy source. Asian LNG consumers will benefit as spot trading promotes the idea of pricing gas against gas, rather than gas against crude oil. If a European trading hub can be set up along similar lines, Russian gas stands to lose market share.
Gabe Collins is the co-founder of China SignPost and a former commodity investment analyst and research fellow in the US Naval War College's China Maritime Studies Institute. END QUOTE
Singapore Emerges as LNG Trading Hub | The Diplomat
ISLAMABAD: The National Assembly was assured on Friday that Liquefied Natural Gas (LNG) will be imported from Qatar at the lowest possible price.
Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi told the House during question hour that the government is currently negotiating the procurement of LNG, reported Radio Pakistan.
He said its import is likely to commence towards the end of the current year.
The minister said the price of LNG has not been negotiated yet and will be done so in a transparent manner, adding that the price of LNG will be kept 30 percent below the price of petroleum.
Speaking about the construction of the LNG terminal, the minister said its completion is expected by November this year,
In regard to the Pakistan-Iran gas pipeline project, the minister said gas cannot be imported from Iran till the sanctions are lifted on the country.
Abbasi said the 2012 Petroleum Policy has been amended by the present government to enhance exploration of oil and gas in Pakistan.
The minister said the government is exploring all avenues to remove the constraints in gas supply. He said the schedule for CNG stations will be reviewed based on factors such as the weather condition and reduction in consumption by the domestic sector.
Abbasi said Balochistan is being given priority in the supply of gas.
Despite difficulty in extending the network for the supply of gas to the entire province due to scattered population and a hilly terrain, 13 district headquarters and 25 tehsil headquarters have been connected with gas in the province.
LNG to be imported from Qatar at lowest possible price: Khaqan – The Express Tribune
==========================================================================================
==========================================================================================
I doubt the parity the minister stated would comply with what he suggests as "transparent manner." I am not sure whether people are still linking gas prices to petroleum. We should peg it to Singapore gas prices or Indian gas prices otherwise I think some big fish will become far bigger fish by taking some bribe and deceiving people of Pakistan. I do see possibility of corruption here.
Singapore is emerging as a large trading hub for LNG and I am sure their prices would be very fair and we have to write a perfect agreement to import LNG without linking it to petroleum. We should rather follow Singapore rates of LNG. Here is an article from the Diplomat.
QUOTE:Singapore Emerges as LNG Trading Hub
An ambitious yet feasible program could have profound implications for the LNG market.
By Gabe Collins
September 17, 2013
In the commodity markets, positioning is often much more important than production. Singapore’s leadership clearly understands this, and by creating the Singapore LNG Corporation (SLNG), the city state is clearly leveraging its superior geographical and intellectual position to try and become Asia’s primary gas marketing hub. Asia accounted for 71% of the world’s estimated 236 million tons of LNG trade in 2012, according to the International Group of Liquefied Gas Importers.
The Singapore SLNG
SLNG, owned by the Energy Market Authority of Singapore, is the designated vehicle for Singapore’s gas trading aspirations and operates the first liquid natural gas (LNG) terminal in Asia capable of importing and re-exporting LNG from multiple suppliers. SLNG commissioned its inaugural LNG cargo in March 2013 from Qatar and the terminal, located on Jurong Island, begin commercial operations on May 7, 2013.
Singapore’s first objective in building an LNG terminal is to secure gas supplies for its own growing demand, and second, to become an LNG trading hub where substantial storage capacity enables buyers to purchase a wide range of cargo sizes. Managing these two objectives is difficult, since the terminal operator SLNG must balance the underlying long-term objectives of Singaporean gas consumers with the shorter term and more variable needs of trading customers. To help bridge this gap and ensure an underlying critical mass of supply, the EMA contracted British Gas to serve as an “aggregator” to help get the project underway.
In a nutshell, British Gas (BG) works on both the supply and demand sides of the market to ensure that the terminal has a “baseline” volume of LNG throughput committed that is sufficient to make operations economically viable. This requires substantial trading and market expertise, as well as ready access to a range of LNG supply sources – qualifications that BG meets via its LNG trading and marketing arms. The aggregator model also aims to make LNG storage more efficient by allowing cargoes to be sold out of a large general pool.
One of SLNG’s most important innovations is that it takes the gas that naturally “boils off” from LNG stored at -261 Fahrenheit and sells it to customers in Singapore. LNG traders then simply take their volumes from the portion of the stored gas that remains in a liquefied state. This policy keeps traders confident that they are capturing the full energy value of any cargo they bring into and sell out of Singapore’s LNG storage tanks. That confidence in turn facilitates the development of a more liquid trading market because storage terminals, buyers and sellers are aware they can now fully capture price differences and exploit arbitrage opportunities without bearing the costs of gas that boils off.
As such, market participants can now truly think in terms of gas molecules, rather than the old inflexible view of “specific cargoes held for specific customers.” Making the gas molecules fungible helps the terminal operator meet the smaller volume, shorter term demands of many trading customers. Fungible gas and active trading also captures additional economic value, since a US$1/million BTU increase in the price of natural gas means the value of gas stored in a 188,000 cubic meter SNLG storage tank would increase by US$4.5 million (assuming the tank is 90% full). Traders can now, with reduced risk, commission LNG cargoes from Singaporean tanks on short notice when, for instance, a Siberian cold snap heads toward China and South Korea and gas prices begin to rise.
Size and Sourcing
SLNG says its terminal will have an initial re-gasification capacity of 3.5 million tons per year (equal to roughly two weeks of gas consumption in Japan, the world’s largest consumer of LNG) and has the ability to expand this to 6.0 million tons per year or more if market conditions prove favorable.
Singapore LNG aims to source its supplies globally. As noted above, the terminal has handled cargo from Qatar and British Gas will also source LNG from projects in which it holds equity stakes, including Trinidad, Egypt, Nigeria and Equatorial Guinea, as well as its coal gas LNG project in Queensland, Australia, which is scheduled to come online in 2014.
Strategic Implications
The venture faces a number of significant challenges, but if it succeeds, in the emerging global LNG spot trading market, Singapore may be able to complement its existing outsize role in the Asian oil and refined products markets and become Asia’s premier natural gas trading hub as well.
First, the demand side. Among key markets for LNG spot and short-term cargoes traded out of Singapore, Japan and South Korea stand out as the highest potential near-term markets. Japan continues to grapple with the aftermath of the Fukushima nuclear disaster, which reduces the appeal of nuclear power and will continue to drive strong LNG demand that in turn creates a need for spot cargoes to keep gas-fired power plants humming during winter cold snaps and summer heat waves. Likewise, during the winter months South Korea often finds itself needing to source substantial supplies of LNG on the spot market.
Southeast Asian countries, in aggregate, are also emerging as a source of LNG demand. Indonesia and Malaysia are rapidly becoming net energy importers and by 2018, Indonesia, now the world’s third largest LNG exporter, may begin importing LNG for its own use. Thailand, meanwhile, plans to double its LNG import capacity to 10 million tons per year, and currently gets the majority of its supplies from the spot market. Singapore LNG is also located in advantageous proximity to the emerging Southeast Asian LNG importers.
Finally, Singapore LNG is well placed to trade LNG cargoes into China. Chinese gas demand is rising rapidly and importers have so far shown themselves willing to purchase spot LNG cargoes from across the globe, including Algeria, Angola, Russia and Qatar. The growth of spot LNG demand in China has been constrained thus far by heavy regulation of domestic gas pricing. However, as the Chinese government works to clean up the country’s air by stimulating natural gas demand and production from shale and other unconventional gas resources in China, higher prices will also likely help drive additional spot LNG imports into premium priced coastal markets.
On the supply side, successful operation of Singapore LNG’s aggregator trading terminal model will likely help undermine the LNG market’s traditional model of long-term contracts that link natural gas prices to the price of oil and oil products. Buyers welcome the prospect of this breakdown, since the shale gas revolution in North America is illustrating that greater unconventional gas production can more permanently support pricing gas against gas and making clean-burning gas a lower-cost energy source.
Qatar and Russia are likely to be the gas/LNG exporters most opposed to seeing gas priced independently of crude oil. Qatar sells a substantial volume of spot cargoes but clearly prefers a more stable long-term revenue stream over the potential revenue roller coaster that trading of spot cargoes entails. Russia, in particular, will face a tough road because in Europe, its core market, its gas would have to compete on price with gas from suppliers such as Algeria and Norway, which are located closer to customers and have lower transport costs.
In addition, Norwegian gas marketers have fully embraced the reality that they must find ways to sell their gas in a more competitive marketplace, while Gazprom’s marketing department refuses to adapt to the new reality of a more gas-rich world in which customers no longer have to accept inflated oil-indexed prices. If a European LNG trader can establish a facility like Singapore LNG’s aggregator-managed trading terminal and catalyze additional spot LNG trading in the massive EU gas market, Russian gas suppliers will be forced to either adopt a more flexible pricing regime, or lose market share.
The big supply side wild-cards will be shale gas exports from the U.S. and the emerging gas reserve holders in East Africa, such as Mozambique and Tanzania, whose huge offshore reserves and relatively small domestic markets could make them some of the world’s largest LNG exporters by 2025. LNG production plants in East Africa would be well-positioned to serve the Asian and European markets.
The key factor that remains to be seen is how much of the new LNG producers’ capacity might be allocated to spot and short-term sales, as opposed to the traditional long-term contract structure. U.S. gas exporters, who will have been steeped in the idea of a truly competitive natural gas market in which molecules from LNG and pipelines compete head to head, are likely to be much more comfortable with the idea of selling substantial gas volumes into a more short-term, trading-oriented marketplace.
Singapore LNG has introduced a creative and disruptive new LNG marketing idea that appears to have a very good chance of achieving commercial success. Greater market liquidity offers greater incentives for small and innovative players to enter the market and could ultimately make LNG a more widely used energy source. Asian LNG consumers will benefit as spot trading promotes the idea of pricing gas against gas, rather than gas against crude oil. If a European trading hub can be set up along similar lines, Russian gas stands to lose market share.
Gabe Collins is the co-founder of China SignPost and a former commodity investment analyst and research fellow in the US Naval War College's China Maritime Studies Institute. END QUOTE
Singapore Emerges as LNG Trading Hub | The Diplomat
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