Petroleum is my field. Whatever PTI stalwarts, NAB and any other detractors may or may not ‘Spinout’; Qatar LNG Deal with Pakistan was above board and a good one. Only crime Khaqan Abbassi is guilty of is getting Pakistan cheap LNG. But in my country that is also a ‘CRIME’.
The following articles illustrate what International media thinks of the deal.
Pakistan Pits World's Biggest Sellers and Saves $600 Million
by Bloomberg
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Faseeh Mangi & Dan Murtaugh
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Monday, September 10, 2018
(Bloomberg) -- Pakistan said it saved more than $600 million over the first 10 years of a natural gas supply deal by pitting some of the world’s biggest sellers against each other.
A report from the state’s oil marketing company presented two weeks ago to a senate committee, and reviewed by Bloomberg News, details how the 2016 deal came together with Qatar, the world’s largest supplier of liquefied natural gas. It also sheds a rare light on such high-stakes energy deals, which are almost exclusively settled behind closed doors and stay hidden from public scrutiny.
The maneuvering by Pakistan came after two years of negotiations hit an impasse as Qatar refused to lower its offer price for LNG. So Pakistan sought leverage on the open market in late 2015, publicly seeking 120 cargoes in two large tenders, which brought in bids from suppliers including Royal Dutch Shell Plc and BP Plc.
While negotiations with Qatargas Operating Co. were under way, the tender was “issued to fetch maximum number of bidders and best price option,” the presentation said. “The strategy helped bring down prices with Qatargas and saved $610 million."
Pakistan then informed Qatar about the lowest bid, from Switzerland-based Gunvor Group Ltd., which the Middle East supplier agreed to match. Pakistan still purchased some LNG from Gunvor, awarding it the first tender. But the volumes it sought from the second tender ended up in the final Qatar deal, bulking it up by 25 percent.
The head of a senate committee now scrutinizing the deal, Mohsin Aziz, confirmed the details of the presentation in an interview last week. Pakistan State Oil Co. and Qatargas officials didn’t respond to requests for comment. Gunvor and BP declined to comment. Shell said it looks forward to future LNG options in Pakistan, without directly commenting on the tender.
The deal with Qatar, which was eventually settled for 3.75 million metric tons annually over 15 years, marked Pakistan’s emergence as an LNG buyer. The country turned to imports after its own declining production forced some factories to shut and caused blackouts. Imports have grown rapidly since early 2016, with Pakistan the seventh-largest LNG buyer globally in August, according to Bloomberg vessel-tracking data.
Negotiations between state agencies and foreign LNG suppliers have been a target of criticism by lawmakers in recent years, some of whom claim that the lack of transparency is hiding potential corruption. These concerns helped the nation’s new prime minister, Imran Khan, sweep to victory in July promising reform. Khan, a former cricket star, has also pledged to strengthen Pakistan’s accountability bureau, which is said to be conducting an inquiry into the country’s first LNG receiving terminal.
Against that backdrop, the Senate Standing Committee on Petroleum, which is also looking into other energy-related developments, brought in Pakistan State Oil officials Aug. 31 to explain the history of the deal. That the 2016 Qatar contract was negotiated in private and the only publicly available copy is redacted raised particular concern.
Despite Pakistan State Oil’s assertion that it saved money, Aziz, the committee head and a member of Khan’s party, said there are still concerns over the deal and will likely recommend the matter for further investigation by government agencies.
The redacted portions of the contract, which were also reviewed by Bloomberg, include the following:
The contract price of the LNG per million British thermal units is the equivalent of 13.37 percent of the average price of Brent oil futures for the preceding three months Pakistan can increase or decrease the size of the contract by five cargoes a year, equivalent to about 8 percent The parties can’t renegotiate the price for 10 years Pakistan can sell cargoes to other buyers and divert to other terminals Port charges to unload cargoes for seller can’t exceed $320,000
These details cover normal contract terms that are generally considered in the industry to be commercially sensitive, according to Fauziah Marzuki, an LNG analyst with Bloomberg NEF. The price and other terms of the contract were in line with in other deals reached around the same time, she said.
Since the launch of the LNG industry in the 1960s, long-term contracts have largely been priced as a percentage of oil, known as a slope. A 13 percent slope means that if the price of oil were $100 a barrel, gas would cost $13 per million British thermal units.
https://www.rigzone.com/news/wire/p...saves_600_million-10-sep-2018-156884-article/
Another article:
Assessing Qatar-Pakistan LNG Deal
February 19, 2016
Pakistan has recently negotiated a good bargain with Qatar for importing
$16 billion worth of liquified natural gas (LNG).
Pakistan will import as much as 20 million tons of the super-chilled gas annually from various sources including Qatar, enough to fuel about two-thirds of Pakistan’s power plants. Gas shortage has idled half the nation’s generators. A 75 percent drop in LNG prices since 2014 has dramatically reduced the cost of the South Asian country’s energy needs, according to a Bloomberg report.
LNG arriving in Pakistan from Qatar will fetch 13.37% of the preceding three-month average price of a Brent barrel (considering the present Brent price as a proxy, that would equate to $167.5 per 1000 cubic meters), according to a report in
Azerbaijan's Trend News. It translates to $4.50 per million BTUs.
A comparison with Iran's gas deals with Turkey and Iraq indicates that Iranian gas will not be competitive with
Qatari LNG on Pakistani market. In 2014 Iran was exporting gas to Turkey at above $420 per 1000 cubic meters, but the figure plunged to $225, or $6 per million BTUs, currently due to low oil price. Iran previously said that the price of gas for Iraq would be similar to Turkey's price.
International Chamber of Commerce (ICC) arbitration court has recently ordered Iran to reduce its gas price to Turkey by 15% after Turkey complained. It's not clear if Iran will comply but even if it does, its price will still be $5.10 per million BTUs, much higher than the Qatari LNG price of $4.50 per million BTUs for Pakistan.
As recently as two years ago, LNG shipped to big North Asian consumer like Japan and Korea sold at around $15 to $16 a million British thermal units. Late last year, the price hit $6.65 a million BTUs, down 12% from September, according to research firm Energy Aspects. It expects prices to fall further in Asia this year, to under $6 per million BTUs, as a wave of new gas supply in countries from the U.S. to Angola to Australia comes on line, according to Wall Street Journal.
Petronet LNG Ltd, India’s biggest importer of liquefied natural gas (LNG), is saving so much money buying the commodity from the spot market that it’s willing to risk penalties for breaking long-term contracts with Qatar.
Will Pakistan be able to negotiate a better price with Iran? It seems difficult given the fact that Iranians have a reputation of being very difficult to deal with. Here's an excerpt about Iranians' negotiating style from Iranian-American author Vali Nasr's book "The Dispensable Nation":
"I remember a conversation in 2006 with Jack Straw, who was then Britain’s foreign secretary, about his time talking to Iran. He said, People think North Koreans are difficult to negotiate with. Let me tell you, your countrymen [Iranians] are the most difficult people to negotiate with. Imagine buying a car. You negotiate for a whole month over the price and terms of the deal. You reach an agreement and go to pick up the car. You see it has no tires. “But the tires were not part of the discussion,” the seller says. “We negotiated over the car.” You have to start all over again, now wondering whether you have to worry about the metal rim, screws, or any other unknown part of the car. That should give you a sense of what talking to Iran looks like".
Source: US EIA
Regardless of whether Pakistan succeeds in using Qatar price leverage with Iran. it's good to see Pakistan finally beginning to
take advantage of historic low gas prices to alleviate its
severe load-shedding of gas and electricity.
Growing Demand-Supply Gap in Pakistan
In addition to signing the Qatar LNG deal, Pakistan has launched its first LNG import terminal in Karachi and started receiving shipments from Qatar. Pakistan has also signed a $2 billion deal with Russians to build a north-south pipeline from Gwadar to Lahore. But the country needs to rapidly build up capacity to handle imports and distribution of significant volumes of LNG needed to resolve its acute long-running energy crisis.
https://www.southasiainvestor.com/2016/02/assessing-qatar-pakistan-lng-deal.html
