Again a King arrange safe passage for Nawaz

[HAIDER]

Most Honourable Sir,

I have posted once before that long term gas contracts have been the ‘Norm’ in the LNG industry for a long time. Electric power is the lifeline of the economy and gas is the cleanest & the most efficient fossil fuel for burning as well as generating electricity. Only way to ensure guarantee of supply is through long term supply contracts.

That was a time when the world expected natural gas prices to increase: (Link to the article)

"Aug 5, 2018,06:00pm EDT

Natural Gas Price Spike May Be Looming"
Robert RapierSenior Contributor Energy
www.forbes.com › natural-gas-is-priced-for-perfection


“London, May 11 (Reuters) - Asian liquefied natural gas (LNG) spot prices for July delivery hit highs not seen since mid-2008 this week as import demand from a nuclear power-free Japan rose while recent high oil prices supported gains.

Cargoes of spot LNG in Asia changed hands for $18/mmBtu on average across July, up from $17.50/mmBtu over the past fortnight, while deliveries in the latter half of the month were pegged even higher at between $18.20/mmBtu and $18.30/mmBtu, trading sources said.”

Full article:
Global LNG-Asian spot price hits 4-year high - Reuters
www.reuters.com › article › markets-lng › global-lng-a...

Coal seam gas had been discovered in Australia but little work was done to export it. However high Asian LNG prices caused the beginning of quite a few LNG projects in Australia starting 2012. LNG projects can easily take up to 5 years to complete and according to the most recent data, Australia exported 77.5-million tons of LNG in 2019 displacing Qatar which only managed 75-million tons.

Pakistan imports 3.75-million tons per year from Qatar, whereas Indian annual Imports from Qatar under long term contracts is 8.5-million tons. According to the last news I have Qatar declined to renegotiate Contract price with India

“Qatar turns down LNG pricing renegotiations with India”
https://www.offshore-technology.com/news/qatar-turns-down-lng-pricing-renegotiations-with-india/

But no one is blaming the BJP or Congress gov't for signing longterm projects because everyone realizes that resolving the gas shortage is important and no one can see into the future.

Shahid Khaqan Abbasi genuinely tried to reduce Pakistan’s’ oil import bill when he replaced Furnace Oil with Qatari LNG and also helped in alleviating gas shortage which was causing tremendous hardship to the industry as well as ordinary household. A mortal man can only base one’s decisions on the information available at that time because unless one has a link to the ‘Divine’ that tells you what would happen in the future. Please tell me, could you foresee the COVID -19 outbreak or how much damage it would cause to the world's economy in November 2019?

Dislike and hate PML-N and PPP’s as much as you like but one would expect intelligent & educated Pakistanis to base their judgments on genuine reasons and not because the person could not see the future and forecast LNG price decline.

Sir, in US its common trend when signing long-term contract there always a price negotiable clause in every contract, where seller ready to renegotiate the price if the market price free falls. Where not only price of product but also cost of transportation or the transportation (even some add storage facility cost) cost is also a part of the product itself. Even if I accept that during the era of Abbasi price was high, and he negotiated good price during that particular period, but why he fail to add renegotiation clause, if the price fall in the market.
I would say we have incompetent advisors and no market forecasting teams. Where others spend millions of dollars on data collection and future market forecasting. We sign 15 year's contract fixed price. Which is unbelievable ....In 15 years price fluctuates many times ....

 

[niaz]

Sir, in US its common trend when signing long-term contract there always a price negotiable clause in every contract, where seller ready to renegotiate the price if the market price free falls. Where not only price of product but also cost of transportation or the transportation (even some add storage facility cost) cost is also a part of the product itself. Even if I accept that during the era of Abbasi price was high, and he negotiated good price during that particular period, but why he fail to add renegotiation clause, if the price fall in the market.
I would say we have incompetent advisors and no market forecasting teams. Where others spend millions of dollars on data collection and future market forecasting. We sign 15 year's contract fixed price. Which is unbelievable ....In 15 years price fluctuates many times ....

Sir,

You are quite correct that in most commercial contracts, there is a clause that if the market conditions become too "Skewed"/ too much distorted, either party can have a price reopener and in case of non-agreement, the contract can be canceled after a three months notice.

You are also right that while 'Price' may be decided by the big boss; small print of the contract clause by clause is hammered out by the underlings. My guess is that the Qatari's probably insisted that their standard Terms & Conditions would apply. These terms & conditions were formulated in the 1990s when Qataris signed the first two Sales and Purchase agreements with eight Japanese customers (1992 & 1994). The contract for the supply 4 million tonnes of LNG per year to Chubu Electric and six million tonnes per year over a 25-year period for the eight customers.

This was done even before the completion of the first LNG train which came on stream in 1996 when the first cargo was shipped to Japan. This was, however, the time when the suppliers called the shots. All the contracts were linked to crude prices (our agreement with Iran piped natural gas was also crude price linked). Had the international price of LNG fluctuated in tandem with crude, there would have been no problem. Cheap Australian coal seam gas and slow down due to Coronavirus changed all that.

Replacing Furnace oil with LNG was a good move and had good intentions behind it. The reason why it went pear-shaped proves that the road to hell is often paved with good intentions. But my objection was primarily aimed at your words:

“ Obviously this SOB sign the most dirty LNG contract with Arab shiekhs and now LNG is half the price in the market. And because of sovereign guarantees involves Pakistan can not renegotiate the price and has to stick with contract and kept on paying the double price .... I feel sometime write one whole topic , how these GCC are sucking our blood and innocent people of Pakistan think they are our best friends..”

The ground reality is that nearly 4-million Pakistanis live & work in the Arab Gulf countries and remit about $20-billion in FE to Pakistan each year. But you are discounting all of it and calling them ”Blood Suckers” just because of one high price LNG deal with Qatar!

Most would agree that your outburst against the Gulf countries was way ‘Over the top’

 

[HAIDER]

Sir,

You are quite correct that in most commercial contracts, there is a clause that if the market conditions become too "Skewed"/ too much distorted, either party can have a price reopener and in case of non-agreement, the contract can be canceled after a three months notice.

You are also right that while 'Price' may be decided by the big boss; small print of the contract clause by clause is hammered out by the underlings. My guess is that the Qatari's probably insisted that their standard Terms & Conditions would apply. These terms & conditions were formulated in the 1990s when Qataris signed the first two Sales and Purchase agreements with eight Japanese customers (1992 & 1994). The contract for the supply 4 million tonnes of LNG per year to Chubu Electric and six million tonnes per year over a 25-year period for the eight customers.

This was done even before the completion of the first LNG train which came on stream in 1996 when the first cargo was shipped to Japan. This was, however, the time when the suppliers called the shots. All the contracts were linked to crude prices (our agreement with Iran piped natural gas was also crude price linked). Had the international price of LNG fluctuated in tandem with crude, there would have been no problem. Cheap Australian coal seam gas and slow down due to Coronavirus changed all that.

Replacing Furnace oil with LNG was a good move and had good intentions behind it. The reason why it went pear-shaped proves that the road to hell is often paved with good intentions. But my objection was primarily aimed at your words:

“ Obviously this SOB sign the most dirty LNG contract with Arab shiekhs and now LNG is half the price in the market. And because of sovereign guarantees involves Pakistan can not renegotiate the price and has to stick with contract and kept on paying the double price .... I feel sometime write one whole topic , how these GCC are sucking our blood and innocent people of Pakistan think they are our best friends..”

The ground reality is that nearly 4-million Pakistanis live & work in the Arab Gulf countries and remit about $20-billion in FE to Pakistan each year. But you are discounting all of it and calling them ”Blood Suckers” just because of one high price LNG deal with Qatar!

Most would agree that your outburst against the Gulf countries was way ‘Over the top’

Sir these are highest number and remittances kept of falling after 2017 due to constant oil market uncertainty and Pakistani labor constantly coming back home. Now our major chunk of FE comes from EU and North America.

As far as LNG contract , we also have issue in cost of transportation, tanker parking or hefty penalty delay in unloading the vessel . Plus, if we have demand or no demand we have to buy certain quantity. Qatari state interest in LNG terminals. Check the record Sir how much we paid to Qatari govt delay in unloading ...which is in millions in dollars ... all local transactions in dollars ....
Sir these arabs are not that smart, you know well, they hire British and US consulting firm to cut these deals...and our end , few bureaucrats who work for the bone ...
(only oil from KSA we bought over 10 to 12 billion dollars)