ISLAMABAD: Qatar is awaiting progress on ‘reforms’ Pakistan assured last month to facilitate about $3 billion investment in the country as part of foreign financing arrangements required during the current fiscal year under the International Monetary Fund (IMF) programme.

Qatar has been seeking pipeline capacity allocation to transport liquefied natural gas (LNG) through a terminal it plans to set up with local partners near Karachi, level playing field for LNG marketing and a terminal, and exemption from third-party access (TPA) that requires certain terminal capacity for use by government entities.

Ahead of Prime Minister Shehbaz Sharif’s Aug 23-25 visit to Qatar, the Economic Coordination Committee (ECC) of the cabinet on Aug 19 approved changes to the LNG policy to remove restrictions on upcoming private sector LNG terminals to provide their part capacity to the government. The amendments were soon ratified by the cabinet.

During the visit, Minister of State for Petroleum Musadik Malik sought his Qatari counterpart’s intervention to “re-engage” on LNG sector cooperation, including speedy completion of the LNG terminal and another long-term contract for more gas supplies on top of two existing long-term contracts in addition to LPG supplies.

Doha’s state-owned investment fund declares intent to invest $3bn during PM’s visit to energy-rich country

Informed sources said Mr Malik had also informed his counterpart that a major change in LNG policy had been approved by the ECC and ratified by the federal cabinet under which Qatar-sponsored Energas LNG Terminal would not be under obligation to provide terminal capacity to the government.

The sources said the hosts complained that Qatargas, the world’s largest LNG company, had been pushing for policy support during the tenures of both previous and current governments in Pakistan at various levels, including the regulator and gas companies, to facilitate the terminal’s construction but the reforms had “come too late”.

Nevertheless, Qatar showed a willingness to proceed further after going through the approved reforms even though LNG supplies may remain a challenge given the prevailing prices and latest supply commitments to Europe.

For Qataris, the most viable and “ready for take-off” project is the LNG supply chain because all other proposed options — the sale of LNG power plants and long-term lease of major airports — had to practically start from scratch.

“They are ready to invest money but there is no way at present to invest,” an official said, adding that Pakistan’s political leadership was too eager for Qatar’s investment, but stakeholders — relevant ministries, companies and the regulator — appeared to have created wheels within wheels.

Financial advisers on LNG power projects have separately advised the government to immediately finalise gas sales and power-purchase agreements (GSAs and PPAs), debt re-capitalisation and payment mechanism if it wanted to sell two LNG-fired power plants to Qatar early.

During the premier’s visit, Islamabad had promised to share “progress on reforms”, including allocation of pipeline capacity, exemption from TPA and one-window operation.

While the ECC and the cabinet approved TPA exemption and part of this was to be done through an amendment to Oil and Gas Regulatory Authority (Ogra) ordinance through parliament, the regulator later reported that the change was not required.

On pipeline capacity allocation, one of the two gas companies — the Sui Southern Gas Company Limited — had approved capacity allocation for Energas Terminal, but Ogra hasn’t cleared it so far.

The Sui Northern Gas Pipelines Limited also has not yet made capacity allocation. Likewise, facilitations under network code are also yet to take place.

Under the said ‘reforms’, the government removed a key sticking point for the private sector’s LNG terminals on a merchant model but also covered even existing terminals to utilise their spare capacity, which is not contracted by the government but has yet to be formally notified.

The ECC and the cabinet have approved that Article 6.2(a) of the 2011 LNG policy be replaced with amendments under which provision of third-party access to new LNG terminals and associated facilities, developed by the private sector without involving any government guarantees or off-take commitments, will be optional on a negotiated tariff with first right of use for terminal developers, operators and their associated undertakings.

This optional TPA will be for 20 years, starting from the date when construction begins, and after that the terminal will be subject to mandatory TPA, whether it is regulated TPA or negotiated TPA, following the principle of use-it-or-lose-it (UIOLI).

Also, the terminal developers, operators and associated undertakings will submit relevant information, including capacity utilisation and terminal tariff (only in case of TPA), to Ogra for information and market monitoring.

Secondly, TPA to the unused capacity of LNG terminals, contracted by public sector entities, will be mandatory and regulated by Ogra.

However, TPA to any excess capacity of the LNG terminals not contracted by public sector entities will be optional based on a negotiated tariff with first right of use for terminal developers, operators and their associated undertakings.

Thirdly, new LNG terminals shall enter all commercial arrangements at arm’s length and in a fair and reasonable manner while fully adhering to the conditions of their licence issued by Ogra.

Published in Dawn, September 26th, 2022