Pakistan: LNG import: some questions

After almost a decade of trying, LNG imports are now closer to becoming a reality. In a recent news conference, Petroleum Minister Shahid Khaqan Abbasi said the project is “in its final stages” and even mentioned the prospect of an early commissioning.

Moreover, the government appears to have done the groundwork to develop a consensus around the allocations from the new gas, giving the vehicular CNG sector a large share of the imported gas, while diverting its allocations from domestic gas towards other sectors. In time, the minister said, all of the imported gas may end up allocated for vehicular use, freeing up domestic gas for the remaining stakeholders.

Some of the numbers floated by the minister need closer scrutiny. For instance, it is not clear how the imported gas will be only 5pc to 8pc costlier than the existing price.

If the minister is referring to the price at which the gas will be sold to consumers, then clearly there will be a subsidy element.

But if he is referring to the landed cost of the LNG, then it needs clarification what price the government is anticipating to pay in the spot markets, where prices are almost double what they are for domestically produced gas.

Likewise, the savings of $2.5bn in imports of oil that the minister claims will be realised as a result of allocating all imported gas for vehicular use needs to be explained.

Is his government thinking of sharply increasing the number of vehicles running on CNG after this decision is implemented?

If so, this would be adding to the folly of having encouraged the vehicular use of natural gas in the first place.

The ministry should release a breakdown of the numbers behind these claims, giving details of the cost at which the gas will be sold to the CNG station operators, and what cost they will be selling it on to end consumers.

If a subsidy is involved, it should also be made clear at the outset, as should data on how the $2.5bn of savings on oil import has been computed.

Nevertheless, it is encouraging to note that the government has finally managed to put some momentum behind the LNG import project.

The idea has languished in our political culture of recriminations for far too long now.

Admittedly, all parties involved do not feel fairly treated, particularly those who believe that their bids for the project were denied due consideration on political grounds.

But it is a positive sign for the country that the first consignment of imported gas may soon arrive to breathe new life into our energy-starved economy.

From here on, the overriding priority is to ensure fair play in decisions on allocations, and transparency and reform in pricing matters.

In the final analysis, our gas woes will only end once we learn to price the precious resource appropriately.