Blending Domestic And LNG Price

The ongoing LNG debate, especially the one aired as a “great” debate, seems to have served the very purpose most TV debates in Pakistan do. Further polarization, with arguments going to the backdrop. Most important of the few valid points raised in the debate was the treatment of LNG pricing and the options to use weighted average pricing to bridge the gap from domestically produced gas.

Recall that domestic natural gas is priced at an average of $4.59/MMBtu. The LNG average consumer price as decided by the regulator has averaged $10/MMBtu on a 12-month moving basis. The disparity is huge and there will always be repercussions of opting for a simple blending of prices using weighted average.