From Platts

Energy-starved Pakistan expects no changes in its long-term LNG supply agreement with Qatar or its plans to build a natural gas pipeline with Iran, despite geopolitical uncertainties.

Pakistan, which relies on gas for around 50% of its energy needs, has seen domestic natural gas production stagnate at around 4 Bcf/d against a demand of more than 6 Bcf/d.

Consumption is growing at an annual rate of 5%, driven by a growing economy, rising demand from the power and industry sectors, and expansion of the country’s gas supply and distribution network.

“Pakistan has a 15-year commercial contract with Qatar for LNG supply, and the severing of diplomatic ties between Qatar and Saudi Arabia would have no impact on this deal,” Pakistan’s Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi said at a media briefing in Islamabad earlier this week.

Only if sanctions were imposed or a force majeure declared on Qatar’s LNG exports would this agreement face a threat, Abbasi added.

But severe trade flow disruption is unlikely as global energy security is at stake with several major economies heavily dependent on LNG exports from Qatar, the world’s largest supplier of the fuel.

Pakistan imported more than 2.5 million mt of LNG from Qatar in 2016, according to Platts Analytics.

Qatar’s three biggest customers — Japan, India and South Korea — imported more than 11 million mt each, accounting for almost half of Qatar’s total exports of 78.8 million mt.

LNG trade disruption worries have emerged amid rising diplomatic tension in the Middle East following the decision by Saudi Arabia, Bahrain, Egypt and the UAE on June 5 to cut diplomatic ties with Qatar over alleged funding of terrorism and extremism.

However, concerns were eased this week with the resumption of Qatari LNG flows into Egypt and through the Suez Canal, a key route for Middle Eastern LNG shipments to European markets, and following reassurance by Qatar Petroleum, owner of Qatargas and Rasgas, of its commitment to mitigate the impact on its LNG exports.

In a company statement released Saturday, President and CEO Saad al-Kaabi underlined Qatar Petroleum’s “determined efforts to continue uninterrupted supplies as the world’s most reliable LNG supplier.”

IRAN-PAKISTAN PIPELINE

Pakistan also remains committed to the Iran-Pakistan gas pipeline project despite concerns about international sanctions through a “snap back” mechanism, a clause within the UN agreement that allows the full range of penalties to resume automatically in the event that Iran is perceived to be violating the deal it made with Western powers.

“The transaction of dollars has not been allowed and investors are not willing to finance due to ‘snap back’ clause which may lead to sanctions again on the project,” he added.

The IP pipeline, which is expected to supply Pakistan with 0.75 Bcf/d from its gas-rich neighbor, has suffered construction delays since it was first conceived in the 1990s, with recent Iranian media reports saying that the project could even be shelved.

EXPANDING SUPPLY

Pakistan is making a concerted effort to expand its LNG import capacity, especially since global oversupply and low prices are helping the country resolve its decade-long energy crisis.

The government was in negotiations with several international companies looking to invest in terminal infrastructure and across the LNG value chain and expected to reach an agreement in the next few weeks, Abbasi said.

Currently, LNG imports are delivered aboard the Exquisite, an FSRU with the capacity to inject 0.6 Bcf/d of gas into the system.

Another six FSRUs are in the pipeline, four of them due to startup by 2018, bringing the country’s regasification capacity to 3.4 Bcf/d.


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