India has set a benchmark of LNG price from Qatar in the
region at $10-12 per MMBTU posing an enormous challenge to Pakistani
authorities.

According to Dr Miftah Ismail, Chairman Board of Investment
who is also chairman of board of directors of Sui Southern, as per existing
international price, the LNG price from Qatar will hover at $17 per MMBTU for
Pakistan. After adding other charges it will hover at $18.

Dr Miftah said if the LNG is provided to power houses the
sales tax will be re-adjusted. So the cost of LNG price because of GST will not
increase.

When his attention was drawn towards the fact that India is
importing LNG from Qatar at $10-12 per MMBTU as mentioned in the letter of
energy expert Arshad H Abbasi associated with SDPI written to Prime Minister
Nawaz Sharif, Dr Miftah said: “I assure that this government will get a better
deal with Qatar and we will also look into the Qatar-India deal prior to
advancing on LNG deal.”

However, independent sources said that the government has
made up its mind to make the delivered cost of imported LNG from Qatar to end
consumers at $20 MMBTU which will surely be uneconomical.

Top official of the Ministry of Petroleum and Natural
Resources Naeem Malik when contacted said that no price for LNG from Qatar has
been so far negotiated.So far, Pakistan has received the draft agreements from
Qatar which are being examined by Pakistan’s relevant authorities. Another
official said that the LNG price will be settled not at ministry level, but
also at top leadership level of both the countries.

Qatar has sought a LNG supply contract for a period of 15
years extendable for to five years with no price reopener. The country wants a
penalty of $200 million for termination of the agreement at any stage, reveals
a copy of the HoA (Heads of Agreements) made available with The News.

Doha also wants the price to be fixed as a percentage of
Brent, it shows. Agreeing to a fixed Brent rate for 15 years will be like
mortgaging Pakistan’s future generations.The officials said that the government
was committing a sovereign guarantee to cover the obligations under the
agreement. This is against the LNG policy, they added.

Pakistan is likely to give its response to Qatar to the
draft agreement on February 18 and will ask Doha to do away with the condition
of no price opener in LNG supply agreement for 15 years that Doha has
suggested.

The Joint Ministerial conference between Pakistan and Qatar
will be held in Doha. Managing director of PSO and top officials of PPL
(Pakistan Petroleum Limited) and senior officials of the ministry would
accompany Federal Minister for Petroleum and Natural Resources Shahid Khaqan
Abbasi.

Meanwhile, the letter written by Arshad H Abbasi to prime
minister, eminent energy experts associated with SDPI mentions that India has
already set the benchmark in pricing in this region, having negotiated a
landing price of LNG of 10.5/MMBTU from the USA.

Similarly, looking at India’s LNG price from Qatar between
the time period of October 2012 to July 2013, it has ranged between
$10-12/MMBTU, and the price that did not rise to more than $11/MMBTU in 2013.

To avoid litigation in the future, it may be wiser if
Pakistan renegotiates the prices in advance, especially because base price and
price index, once inked in the contract are subject to little or no change.
Moreover, there must be a price review clause in the agreement after every
year.