LNG in the age of outrage
Fasih Ahmed
In the latest debate over Pakistan’s energy costs, a single number is being used to fuel public outrage: the daily payment made to the country’s LNG import terminals. It is often described as “payment for nothing.” In fact, it is payment for readiness.
An LNG terminal is not a gas producer or supplier. It is infrastructure. Its job is to remain operational and ready—every hour of every day—so that when a ship arrives, the cargo can be converted back into gas and supplied to the national grid. Think of a fire station. The municipality does not stop paying for trucks, equipment, or firefighters because there wasn’t a fire yesterday. It pays for readiness. The same principle applies here. A terminal that is available and ready is, in fact, performing its function—whether one cargo arrives or more.
The debate turns on a basic distinction that is being overlooked. There are the gas supply contracts, which determine when and how much gas arrives. And there are the terminals, which ensure that when gas does arrive, there is somewhere for it to go. Supply and infrastructure are not the same thing. Treating them as interchangeable is where the argument fails.
A common argument is that supply contracts may suspend deliveries under force majeure while terminal payments continue. This is presented as a design flaw. It is, in fact, risk allocation. Upstream contracts govern whether gas is available. Terminal contracts govern whether the country is ready to receive it. When supply is disrupted, the terminal does not disappear. It remains staffed, maintained, financed, and ready. “No gas, no payment” misstates what is being paid for.
The facts on the ground also do not support the narrative of unready infrastructure. Gas flowed through March. There was a temporary interruption in April. But on April 30, an LNG cargo had docked, supply resumed, and the Power Minister credited this gas for ending load-shedding. At least two additional cargoes are scheduled to arrive this month. Qatar invoking force majeure has not halted Pakistan’s ability to source LNG and supply it to consumers.
The terminals have verifiably served the country. According to the State Bank of Pakistan, citing the National Electric Power Regulatory Authority, Pakistan generated 72,755 gigawatt hours of electricity from LNG between FY2017 and FY2020 at a cost of Rs. 666.3 billion. The same electricity from furnace oil would have cost Rs. 900 billion. That is a saving of Rs. 234 billion. These are figures up to FY2020 alone and do not include billions in tax revenues earned by the exchequer. Conservatively, every cent paid to the terminals has been earned back.
Pakistan’s LNG terminal tariffs are among the lowest globally—lower than comparable terminals in India, Bangladesh, Egypt. This is not an overpriced system. It is a cost-efficient one. Land-based LNG terminals, which Pakistan had explored, are famously capital-intensive, and their far higher tariffs reflect that economic reality.
The more consequential issue is not the arithmetic but the proposed remedy. Calls to reopen contracts through regulatory or other interventions assume that agreements can be rewritten whenever circumstances become inconvenient. The law is about argument and evidence, not regret and indignation. Contracts of this kind underpin hundreds of millions of dollars of investment. They depend on predictability. If they are treated as provisional, the result is not savings. It is delay, higher costs, collapse of investor confidence, and damage to the country’s economic reputation. Pakistan has learned this the hard way.
The real question is not why payments continue when supply is disrupted. The real question is what those payments are for. They pay for readiness. They ensure that when gas is available—as it now is—the country can receive it immediately, without scrambling, without delay, and without rebuilding capacity from scratch.The number being repeated is the cost of investing in a system that works. And in a country that has known energy shortages all too well, that is not a luxury. It is a necessity. You can have outrage built on a number. Or you can have a system that works. You do not get both.
—The writer is Chief Executive of Pakistan GasPort Consortium Limited, which owns and
operates one of the country’s two LNG terminals.
