Pakistan's Economic Coordination Committee (ECC) is expecting to use a letter of credit (L/C)-based financing mechanism in a plan to import one billion cubic feet per day of liquefied natural gas (LNG).

The committee, which is part of the cabinet, is likely to approve the plan in its efforts to alleviate gas shortages, particularly during the winter.

Sovereign guarantees

One aspect of the plan is that Pakistan will provide sovereign guarantees for a series of three-month revolving standby L/Cs.

These will be opened by all gas purchasing companies to a value equivalent to the cost of three-months LNG supplies.

Back-to-back L/Cs

Turkey's Global Energy, which is Pakistan's chosen LNG supplier in this plan, has insisted that sovereign guarantees back all L/Cs opened in its favour.

Gas utility companies and power producers meanwhile will also have to open back-to-back L/Cs under the financing structure.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.