Qatar brings down LPG costs for Pakistan, while India’s request waits unresolved

Last updated on February 9th, 2023 at 12:31 pm

Qatar is, as of now, is Pakistan’s most significant gas suppliers after consenting to a 15-year deal to export up to 3.75 million tons of LNG a year toward the South Asian nation in the 2016 agreement. In May 2019, Qatar lured Pakistan by cutting down the cost of LNG in a bid to win another multibillion-dollar supply contract amid solid competition with Saudi Arabia in the energy market.

As per the Dawn news, in Dec 2019, Prime Minister Imran Khan mentioned that Qatar was requested by former finance minister Asad Umar to reduce the cost of LNG being supplied to Pakistan (at 13.37pc of Brent) in a 15-year deal.

A senior Pakistani official revealed to Reuters last year that state-run Qatar gas set forward the lowest bid for a long-term LNG supply agreement that would have a price review following five or ten years.

This year in Jan, India also requested Qatar to lower the cost of LPG gas under the current long-term supply agreement, a request that Doha turned down, saying that the sanctity of the deal is vital for the credibility of both nations.

India imports 8.5 million tons of LPG per year from Qatar with a rate connected to crude oil prices at a value equivalent to 12.67 % of the three-month standard Brent crude cost, whereas according to the Tribune’s May 2019 article, Qatar quoted two prices for LNG export to Pakistan. In the first proposal, it offered LNG at 11.25% of Brent crude with value audit following five years if Pakistan signs a 15-year contract.

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Oil Minister Dharmendra Pradhan met with the Qatar Energy Minister Saad Sherida al-Kaabi a month ago to urge for the necessity for realignment of existing long-term LPG agreements with the market, saying “we need to re-examine the pricing system of the long-term natural gas agreement with Qatar,” he included.

To which Kaabi responded, “we don’t renegotiate existing agreements.” however, Qatar was eager to supply extra volumes at different prices, the Economic Times revealed.

The power sector, which is the second-biggest consumer of gas, requires a landed cost of LPG to be close to USD 4.5-5 for each mmBtu. Any price higher than that won’t help electricity generated utilizing gas. India uses 157 million standard cubic meters of gas per day, half of which is imported, The Economic Times published.

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