It has also been incorrectly stated in the referred articles that the first couple of consignments of LNG to Pakistan after the deal was signed received in March/April 2016 were at the rate of US$ 5.35 per MMBTU.
The fact is that in March 2016, three consignments from Qatar were at the rate of US$ 4.6550 per MMBTU and in April 2016, the price of the three consignments from Qatar was priced at US$ 4.6955 per MMBTU. Not US$ 5.35 per MMBTU stated in the article.
In our clarification carried by Business Recorder on October 3, 2017; it was clarified that the cargoes supplied on spot basis cannot be compared with the long term contracts and the market dynamics of the two are entirely different. Despite that clarification the current article has intentionally ignored the factual perspective.
It is therefore, reiterated that it is because of the fluctuation of prices in Spot Market which is dependent on many factors like demand and supply situation, global weather conditions, maintenance of LNG plants, geopolitical situation, freight elements, port charges, country specific business conditions, payment terms and LNG volumes, etc.
Regarding upward and downward flexibility mentioned in the article, it may be noted that such clauses are standard clauses in contracts, which are built to provide flexibility for the buyers.
It must be noted that the upward or downward flexibility if exercised; is only for a particular year and not for the entire remaining term of the contract, as construed in the article. The writer should clarify as to the disadvantage of this option and the reduction in risk in case of emergency or whether in case additional 1/2 cargoes are required, the negativity of this option.
Further, regarding the concern raised on supplier's inability to find an alternate buyer in case of inability of PSO to take a scheduled cargo; it may be noted that long-term LNG supply agreements are on "Take or Pay" basis and the option of selling to an alternate buyer by the seller in case of failure to take the delivery by the buyer, actually is a mitigation step to avert any "Take or Pay" penalties for the buyer.
Moreover, the larger seller of LNG in the world is better placed and there is a strong possibility of QatarGas being able to do that instead of Government of Pakistan. Is this not prudent and if the writer knows of a better solution we suggest it be highlighted so that future procurements may learn and be inspired?
As for port charges, it may be noted that Pakistan has one of the highest port charges for incoming LNG vessels in the region. This is because the Port Qasim Authority initially determined the port charges to be around US $ 1.0 million per call, that with the cooperation of Port Qasim Authority have now reduced to around US$600,000. There are continuing discussions to reduce these charges further.
It is expected that with the increase in LNG vessels calling at Port Qasim and rationalization of some other cost elements including US Dollar based rate of return of 10%, the charges will be further reduced by the Port Qasim Authority.
The benefit of LNG continues to be acknowledged by all with the realisation that the fifth largest growing economy in the Muslim world cannot wait for a miracle expected by the pundits and experts.
The benefits, for instance, can be further evidenced by the fact that September fuel charges proposed by Nepra are Rs 8.0343/kwhr for RLNG, Rs 14.1535/kwhr for HSD and Rs 9.5433/kwhr for RFO, respectively.
It is indeed a matter of concern that even after conceding that the redacted agreement with QatarGas is available on PSO website and that all the clauses bearing confidential information are really not confidential and the facts are verifiable and known due to sharing of information repeatedly publicly by the Ministry of Energy (MoE), the writer cannot let go and still holds on with the statement that discredits efforts made to bring LNG to Pakistan with proven benefits for our energy starved nation.
Copyright Business Recorder, 2017