Let down by UAE firm, Pakistan seeks two LNG cargoes

[HAIDER]

Let down by UAE firm, Pakistan seeks two LNG cargoes
Khaleeq KianiPublished January 20, 2021Updated a day ago
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The government has sought urgent tenders for liquefied natural gas (LNG) deliveries in third and fourth week of February. — Reuters/File
ISLAMABAD: The government has sought urgent tenders for liquefied natural gas (LNG) deliveries in third and fourth week of February to fill the gap arising out of a default by Emirates National Oil Company (ENOC) on its supply commitment.
A senior official at the Ministry of Energy (Petroleum Division) confirmed that two cargoes had been sought from the international market using emergency provisions of the procurement rules. He said Pakistan LNG Limited (PLL) — the state-run entity responsible for import of LNG — had approached prospective suppliers for LNG delivery on Feb 15-16 and Feb 23-24.
In such circumstances, normal tendering schedules become impractical and, therefore, bidders have been asked to submit their bids within three days i.e. latest by Jan 22.
On Sunday, PLL confirmed that the UAE firm ENOC had defaulted on its bid.
PLL had advertised a tender on Nov 28, 2020 for procurement of two spot LNG cargoes for delivery in February. On Dec 28, bids were opened and results announced and, in accordance with the PPRA Rules, the award intimation was made 10 days later, on Jan 7.
The first spot cargo for mid-February was awarded to SOCAR Trading UK Ltd — an entity of Azerbaijan. The second spot cargo for the last week of February was awarded to the lowest bidder, as per the PPRA Rules, which expressed inability to deliver as per its bid, PLL said, adding that it had approached the 2nd and 3rd lowest bidders within the bid validity period, but they regretted to deliver the cargo at the prices they had offered in their respective bids.
Sources claimed that SOCAR was also finding it difficult to honour its bid and, therefore, the second tender was sought for delivery on Feb 15-16 to replace the SOCAR cargo.
Special Assistant to the Prime Minister on Petroleum Nadeem Babar and Petroleum Secretary Asad Hayauddin did not respond to calls for comment.
“This bid default of the suppliers is associated with the recent supply shortages leading to high price volatility in the spot market, coupled with extra buying in North Asia,” PLL said, adding that numerous global companies were reportedly defaulting on their bids and even contracts in some cases, given the supply shortages and extremely volatile prices.
PLL said in a statement on Sunday that “suppliers who have regretted to supply after bidding in the PLL tender include state-run entities and major international LNG traders”. The company said it was taking all measures available under law and PLL’s tender process, including forfeiture of bid bonds, against the bidder(s) who failed to supply cargo as per their bids.
Since February is a low demand month, Pakistan has been importing 7.75 cargoes on average in February for the last four years. At this time, a total of eight cargoes are secured.
PLL said that it was working with the respective users to reconfirm demand at the current prices and was exploring alternatives if demand for an additional cargo in February was reconfirmed.
SOCAR had offered the bid at 23.4331 per cent of Brent for Feb 15-16 window. ENOC had quoted 20.948pc of Brent for Feb 23-24 window, but later walked away.
Published in Dawn, January 20th, 2021

 

[Patriot forever]

From the article.

"Pakistan has been importing 7.75 cargoes on average in February for the last four years. At this time, a total of eight cargoes are secured.
PLL said that it was working with the respective users to reconfirm demand at the current prices and was exploring alternatives if demand for an additional cargo in February was reconfirmed." The shortfall is not that critical.

Now coming to the Asian LNG market trends. I think it would be better to supply additional electricity to industrial units as a substitute for gas or increase oil based power generation and ration LNG power plants for a couple of weeks as it is more cost effective and supply LNG to industries. It is highly unlikely that we will get a reasonable bid in these circumstances. Normally at this time of year we have surplus of furnace oil (from our own refineries) as oil based powerplants are not operating on full capacity due to decreased demand of electricity in winters (Merit order system which petroleum ministry follows). Can anyone give a more informed opinion on this matter especially regarding the cost analysis? @farok84

 

[blueazure]

Why Natural Gas Prices Are Set To Go Higher | OilPrice.com

Natural gas markets have been oversupplied for months, but higher demand in Europe and Asia could finally bring markets into balance

oilprice.com

LNG spot prices rose this winter thanks to the arctic wave .


cant blame anyone here frankly, the companies who won tender were more eager to get their securities encashed vs supplying pakistan at a loss

 

[farok84]

From the article.

"Pakistan has been importing 7.75 cargoes on average in February for the last four years. At this time, a total of eight cargoes are secured.
PLL said that it was working with the respective users to reconfirm demand at the current prices and was exploring alternatives if demand for an additional cargo in February was reconfirmed." The shortfall is not that critical.

Now coming to the Asian LNG market trends. I think it would be better to supply additional electricity to industrial units as a substitute for gas or increase oil based power generation and ration LNG power plants for a couple of weeks as it is more cost effective and supply LNG to industries. It is highly unlikely that we will get a reasonable bid in these circumstances. Normally at this time of year we have surplus of furnace oil (from our own refineries) as oil based powerplants are not operating on full capacity due to decreased demand of electricity in winters (Merit order system which petroleum ministry follows). Can anyone give a more informed opinion on this matter especially regarding the cost analysis? @farok84

Hi,

Thanks for the tag.

As you said, the bids will be towards higher side, I suspect it to be around $15/mmbtu. It is better to utilize alternates (oil fired power-plants) in that scenario. Almost all other South Asian and North Asian importers are relying on alternates and/ or rationing to cover for higher LNG prices. I think another point government will be considering is the hike in per unit price sought by CCPA (on behalf of Discos). From government's POV and public optics, a higher priced LNG cargo which they can very well justify today, will make more sense then the headlines of CCPA seeking a price hike for February in March or April utility bills. The same kinda situation we were in Dec (Nepra v/s CCPA) for October/ November hikes.

Unfortunately, I don't have means nor access to financial, volumes and share (energy mix) futures data to do an effective cost analysis. My information and knowledge resource is quite limited in this arena.

 

[farok84]

https://twitter.com/x/status/1352616535890792448

https://twitter.com/x/status/1352600181196337152

 

[ziaulislam]

https://twitter.com/x/status/1352616535890792448

https://twitter.com/x/status/1352600181196337152

View attachment 709489

What i am saying for last 3 months
People laughed at me.

I also said that companies if losing too much money may walk away from contract. And THAT IS WHAT HAPPENED

This is how spot purchases work

W r t to long term contracts we cant do Long term contracts as summer demand is non existent unless we develop storage

 

[Dr-who]

Anyways the spot price increase was for few weeks, for month of Feb the rate is 8mmbtu

 

[niaz]

[/QUOTE]

SOCAR had offered the bid at 23.4331 per cent of Brent for Feb 15-16 window. ENOC had quoted 20.948pc of Brent for Feb 23-24 window, but later walked away.

All including PTI stalwarts and the NAB who had been claiming that Shahid Khaqan Abbasi signed a stupid high priced 15 years contract and cheated Pakistan out of billions of dollars because LNG prices had touched temporarily touched rock bottom due to a sudden lowering of demand should now take their words back because instead of 13.3% of Brent as fixed in the Qatari contract, bids are being offered at over 20% of Brent and still unable to perform

Instead of saying " I told you so" in my previous posts on this subject; I would say that it is incorrect to compare a long-term contract with an LNG producer, with a spot contract with a Trader. Even though ENOC, as well as Socar, are State-owned companies, these do not produce LNG and simply buy on spot for Trading at a profit, When incurring a LOSS, a trader would have the tendency to walk away if possible. A long-term term contract with a grassroots producer such as Qatar on the other hand provides the security of supply.

Since no one has a 'Crystal ball' to see the future; contracts, long term or Spot, reflect the prices prevailing in the market at a given time. Since prices can go up as well as down, only the ignorant and/or those carrying a grudge cause aspersions on the integrity of the contract price. It is a 15-year contract, the spot price would be often higher or lower than the contract, but there can no guarantee of supply implicit in the term contract with a prime producer. There is a 'Bid Bond' which GOP can cash in case of default, but how do you compensate for the losses and hardship to the end-consumer due to shortage of the gas supply?

I repeat what I said many times before, Shahid Khaqan Abbassi may be the biggest crook in the history of the world; I am certain that in the case of the LNG deal with Qatar no 'Hankey Pankey' was involved because the one the persons from the Qatari side who was among the negotiators assured me so.

 

[farok84]

All including PTI stalwarts and the NAB who had been claiming that Shahid Khaqan Abbasi signed a stupid high priced 15 years contract and cheated Pakistan out of billions of dollars because LNG prices had touched temporarily touched rock bottom due to a sudden lowering of demand should now take their words back because instead of 13.3% of Brent as fixed in the Qatari contract, bids are being offered at over 20% of Brent and still unable to perform

Instead of saying " I told you so" in my previous posts on this subject; I would say that it is incorrect to compare a long-term contract with an LNG producer, with a spot contract with a Trader. Even though ENOC, as well as Socar, are State-owned companies, these do not produce LNG and simply buy on spot for Trading at a profit, When incurring a LOSS, a trader would have the tendency to walk away if possible. A long-term term contract with a grassroots producer such as Qatar on the other hand provides the security of supply.

Since no one has a 'Crystal ball' to see the future; contracts, long term or Spot, reflect the prices prevailing in the market at a given time. Since prices can go up as well as down, only the ignorant and/or those carrying a grudge cause aspersions on the integrity of the contract price. It is a 15-year contract, the spot price would be often higher or lower than the contract, but there can no guarantee of supply implicit in the term contract with a prime producer. There is a 'Bid Bond' which GOP can cash in case of default, but how do you compensate for the losses and hardship to the end-consumer due to shortage of the gas supply?

I repeat what I said many times before, Shahid Khaqan Abbassi may be the biggest crook in the history of the world; I am certain that in the case of the LNG deal with Qatar no 'Hankey Pankey' was involved because the one the persons from the Qatari side who was among the negotiators assured me so.
[/QUOTE]

Dear Niaz sir,

I will highly appreciate your perspective in view of contracted volumes.

PSO signed in Dec 2015, a 5 year term contract with Gunvor for supply of 0.75mtpa at 13.37 slope for delivery of total 60 cargoes (1 cargo/ month or 12 cargoes/ year). This contract was recently concluded in Dec 2020. At the same time, PSO had signed a 15 year term contract for supply of 3.75mtpa for a total of 900 cargoes which translates to 5 cargoes/ month or 60 cargoes/ year at the same slope of 13.37. Shouldn't the volumes have dictated a lesser price?

At the same time, India had renegotiated not only pricing formula but also the pricing benchmark (from 12 month moving average of JCC with the ceiling & floor of 60 month averaged JCC to average of 3-month preceding brent), all on the basis of volumes it was importing (7.5mtpa).

Apart from the higher slope, the a) non existent volume and schedule flexibility b) take or pay clause, seller having obliged buyer to pay for complete 'annual contracted quantity', should have also found a way to penalize buyer for any un-offloaded quantity remaining in the cargo vessel, based on averaged 'standard cargo content', but in the same instant, would have made a play to safeguard its obligation for providing make up LNG, by confining buyer to a firm delivery window within the questioned contract year, plus a lead notice time, like 90 days written notice, which brings us to c) lack of storage facilities. (I am sure your contact will vouch for what I have said to be part of the contract)

PMLN should not be criticized for inking term deals, term deals are essential to secure volumes and safeguard ones economy, but they must be held accountable for the way they negotiated, priced and inked these contracts.

Unfortunately, PTI ministers started this comical Spot v/s Term price debate, and have actually helped PMLN, extending them a lifeline, by opting not to address these actual and boring issues but indulged in playing masses with flashy chyrons of 230% lower LNG. The only sane comments came from Petroleum Div tweets but by then the damage was done and the narrative had been changed.

Eni contract is another prime example of the corrupt practices followed by PMLN government, but unfortunately is not discussed as much as Qatar. The contract is for 1cargo/ month for 15 years with PLL, total 180 cargoes, but the price breakup makes it very interesting.
i) 11.6247% for the first two years (2017 through 2019 - 24 cargoes),
ii) 11.95% for the following two years (2019 through 2021 - 24 cargoes),
iii) 12.14% for the remaining 11 years (2021 till 2032, 132 cargoes). (Also, keep in mind, PLL-Gunvor, 5 year term contract for 1 cargo/ month, priced at 11.6247%, signed at the same time as this Eni contract)

How is this price, a higher price for later years, for a larger quantity can be justified? More and more LNG volumes are adding on, with LNG term prices steadily going down, on a year to year basis, can they be so incompetent not to foresee this?

PMLN has not done Pakistan any favors by singing these deals with extremely favorable conditions to Sellers. The same way PPP has not done Pakistan any favors by signing on a pricing formula based on a 70-30 break-up of Brent and different blends HSFO (Platts price) for TAPI or hedged JCC based price for IP gas. I will also be among the firsts to criticize IK, if his government signed on a 5 year LNG term contract this year for a price of above 10% delivering 1 cargo/ month, or if they ratify current TAPI GSPA or signed onto IP construction with current pricing formula.

 

[niaz]

All including PTI stalwarts and the NAB who had been claiming that Shahid Khaqan Abbasi signed a stupid high priced 15 years contract and cheated Pakistan out of billions of dollars because LNG prices had touched temporarily touched rock bottom due to a sudden lowering of demand should now take their words back because instead of 13.3% of Brent as fixed in the Qatari contract, bids are being offered at over 20% of Brent and still unable to perform

Instead of saying " I told you so" in my previous posts on this subject; I would say that it is incorrect to compare a long-term contract with an LNG producer, with a spot contract with a Trader. Even though ENOC, as well as Socar, are State-owned companies, these do not produce LNG and simply buy on spot for Trading at a profit, When incurring a LOSS, a trader would have the tendency to walk away if possible. A long-term term contract with a grassroots producer such as Qatar on the other hand provides the security of supply.

Since no one has a 'Crystal ball' to see the future; contracts, long term or Spot, reflect the prices prevailing in the market at a given time. Since prices can go up as well as down, only the ignorant and/or those carrying a grudge cause aspersions on the integrity of the contract price. It is a 15-year contract, the spot price would be often higher or lower than the contract, but there can no guarantee of supply implicit in the term contract with a prime producer. There is a 'Bid Bond' which GOP can cash in case of default, but how do you compensate for the losses and hardship to the end-consumer due to shortage of the gas supply?

I repeat what I said many times before, Shahid Khaqan Abbassi may be the biggest crook in the history of the world; I am certain that in the case of the LNG deal with Qatar no 'Hankey Pankey' was involved because the one the persons from the Qatari side who was among the negotiators assured me so.

Dear Niaz sir,

I will highly appreciate your perspective in view of contracted volumes.

PSO signed in Dec 2015, a 5 year term contract with Gunvor for supply of 0.75mtpa at 13.37 slope for delivery of total 60 cargoes (1 cargo/ month or 12 cargoes/ year). This contract was recently concluded in Dec 2020. At the same time, PSO had signed a 15 year term contract for supply of 3.75mtpa for a total of 900 cargoes which translates to 5 cargoes/ month or 60 cargoes/ year at the same slope of 13.37. Shouldn't the volumes have dictated a lesser price?

At the same time, India had renegotiated not only pricing formula but also the pricing benchmark (from 12 month moving average of JCC with the ceiling & floor of 60 month averaged JCC to average of 3-month preceding brent), all on the basis of volumes it was importing (7mtpa).

Apart from the higher slope, the a) non existent volume and schedule flexibility b) take or pay clause, seller having obliged buyer to pay for complete 'annual contracted quantity', should have also found a way to penalize buyer for any un-offloaded quantity remaining in the cargo vessel, based on averaged 'standard cargo content', but in the same instant, would have made a play to safeguard its obligation for providing make up LNG, by confining buyer to a firm delivery window within the questioned contract year, plus a lead notice time, like 90 days written notice, which brings us to c) lack of storage facilities. (I am sure your contact will vouch for what I have said to be part of the contract)

PMLN should not be criticized for inking term deals, term deals are essential to secure volumes and safeguard ones economy, but they must be held accountable for the way they negotiated, priced and inked these contracts.

Unfortunately, PTI ministers started this comical Spot v/s Term price debate, and have actually helped PMLN, extending them a lifeline, by opting not to address these actual and boring issues but indulged in playing masses with flashy chyrons of 230% lower LNG. The only sane comments came from Petroleum Div tweets but by then the damage was done and the narrative had been changed.

Eni contract is another prime example of the corrupt practices followed by PMLN government, but unfortunately is not discussed as much as Qatar. The contract is for 1cargo/ month for 15 years with PLL, total 180 cargoes, but the price breakup makes it very interesting.
i) 11.6247% for the first two years (2017 through 2019 - 24 cargoes),
ii) 11.95% for the following two years (2019 through 2021 - 24 cargoes),
iii) 12.14% for the remaining 11 years (2021 till 2032, 132 cargoes). (Also, keep in mind, PLL-Gunvor, 5 year term contract for 1 cargo/ month, priced at 11.6247%, signed at the same time as this Eni contract)

How is this price, a higher price for later years, for a larger quantity can be justified? More and more LNG volumes are adding on, with LNG term prices steadily going down, on a year to year basis, can they be so incompetent not to foresee this?

PMLN has not done Pakistan any favors by singing these deals with extremely favorable conditions to Sellers. The same way PPP has not done Pakistan any favors by signing on a pricing formula based on a 70-30 break-up of Brent and different blends HSFO (Platts price) for TAPI or hedged JCC based price for IP gas. I will also be among the firsts to criticize IK, if his government signed on a 5 year LNG term contract this year for a price of above 10% delivering 1 cargo/ month, or if they rectify current TAPI GSPA or signed onto IP construction with current pricing formula.
[/QUOTE]

Many thanks for a very incisive post and I totally agree with you regarding the unexplainable rising price in the ENI contract. Having personally dealt with and known to the Qatari National Oil Company, I was only frustrated with the accusation of corruption amounting to billions which I firmly believed to be untrue.

Despite being difficult to prove in a court of law, few would claim that higher echelons of both the PML-N & PPP are 'Lily-white'. I can only repeat a very apt quote from a friend " au chore sun eh nalaiq nein" meaning those people were thieves, these people are incompetent.

 

[AZADPAKISTAN2009]

What happened to our Qatri Brother and their LNG ?

We have a full Iranian Pipeline across from border in Iran and we are begging for LNG and paying millions in fees to Shipping companies

 

[farok84]

What happened to our Qatri Brother and their LNG ?

We have a full Iranian Pipeline across from border in Iran and we are begging for LNG and paying millions in fees to Shipping companies

Hi,

As much as I want that pipeline to be constructed, the pricing formula linked to JCC makes this gas totally unfeasible for Pakistan, specially when the world is moving to price LNG on gas-linked benchmarks (Henry Hub and TFF).

Current Price = (a x JCC) + b,

where,
a = 0.063 (6.3%), when JCC is between $30-70,
0.05 (5%), when JCC falls outside $30-70 range.

b (fixed component) = $1.15/mmbtu, when JCC is between $30-70,
$1.54/mmbtu, when JCC is below $30,
$2.06/mmbtu, when JCC is above $70.

It would be a sad day for Pakistan, if IK government moves forward with construction phase, without renegotiating a gas-linked pricing formula linked to HH, and reducing, preferably completely dropping this 'b' fixed component. Pakistan must not be bearing the operational cost of the Iranian portion of the pipeline, the same way Iran will not be shouldering operational cost for Pakistan's side of the pipeline. This fixed cost is totally unacceptable, and must go.

Although our LNG contracts are delivered ex ship (DES), and the cost of shipping and any other charges (insurance, etc) are covered by Sellers (Qatar, Eni or Gunvor), but for the sake of clarity, lets do a quick hypothetical comparison to the cost of transportation with Qatar's LNG.

Today's spot freight is priced at $160k, with 3 days travel time from Qatar to Port Qasim, and 5 day offloading time (regas at 630mmcfd rate at FSRU), the shipment cost comes out to be $0.3938/mmbtu. How can a fixed price of $1.15/mmbtu at Iran-Pak border justified?

The pipeline has lost its viability for Pakistan under current pricing formula. Iran needs to align the formula with the current market realities, if it wants to sell its gas to Pakistan.

 

[niaz]

Hi,

As much as I want that pipeline to be constructed, the pricing formula linked to JCC makes this gas totally unfeasible for Pakistan, specially when the world is moving to price LNG on gas-linked benchmarks (Henry Hub and TFF).

Current Price = (a x JCC) + b,

where,
a = 0.063 (6.3%), when JCC is between $30-70,
0.05 (5%), when JCC falls outside $30-70 range.

b (fixed component) = $1.15/mmbtu, when JCC is between $30-70,
$1.54/mmbtu, when JCC is below $30,
$2.06/mmbtu, when JCC is above $70.

It would be a sad day for Pakistan, if IK government moves forward with construction phase, without renegotiating a gas-linked pricing formula linked to HH, and reducing, preferably completely dropping this 'b' fixed component. Pakistan must not be bearing the operational cost of the Iranian portion of the pipeline, the same way Iran will not be shouldering operational cost for Pakistan's side of the pipeline. This fixed cost is totally unacceptable, and must go.

Although our LNG contracts are delivered ex ship (DES), and the cost of shipping and any other charges (insurance, etc) are covered by Sellers (Qatar, Eni or Gunvor), but for the sake of clarity, lets do a quick hypothetical comparison to the cost of transportation with Qatar's LNG.

Today's spot freight is priced at $160k, with 3 days travel time from Qatar to Port Qasim, and 5 day offloading time (regas at 630mmcfd rate at FSRU), the shipment cost comes out to be $0.3938/mmbtu. How can a fixed price of $1.15/mmbtu at Iran-Pak border justified?

The pipeline has lost its viability for Pakistan under current pricing formula. Iran needs to align the formula with the current market realities, if it wants to sell its gas to Pakistan.

Very few things to add to this good analytical post. My only comment would be that even assuming transmission cost to be equal, LNG needs to be regasified before it can be used, unlike Iranian gas which can be fed directly into the gas pipeline.

Can't say for sure how much it costs in Pakistan, but to the best of my knowledge regasification costs add between $1.00 & $1.50 per mmBtu to the gas price imported as LNG. Hence this cost needs to be taken into account when prices of natural gas piped & imported as LNG are compared. One would have expected that someone in the Oil Ministry would have done a detailed analysis of the economics of the piped Iranian gas versus gas imported as LNG.

I have no reason to doubt the validity of the numbers given above and It appears that PPP negotiators, in the hurry to sign the gas contract with Iran, did not do their homework diligently. Otherwise piped gas is normally the cheapest option. We have the example of the 2,400 Km Russian "NordsStream2 " pipeline. Understand the price of gas delivered in Europe by Gazprom could easily outcompete any other non-domestic supplier. This is why despite strong pressure from the USA, the EU went ahead with the project.

 

[farok84]

Very few things to add to this good analytical post. My only comment would be that even assuming transmission cost to be equal, LNG needs to be regasified before it can be used, unlike Iranian gas which can be fed directly into the gas pipeline.

Can't say for sure how much it costs in Pakistan, but to the best of my knowledge regasification costs add between $1.00 & $1.50 per mmBtu to the gas price imported as LNG. Hence this cost needs to be taken into account when prices of natural gas piped & imported as LNG are compared. One would have expected that someone in the Oil Ministry would have done a detailed analysis of the economics of the piped Iranian gas versus gas imported as LNG.

I have no reason to doubt the validity of the numbers given above and It appears that PPP negotiators, in the hurry to sign the gas contract with Iran, did not do their homework diligently. Otherwise piped gas is normally the cheapest option. We have the example of the 2,400 Km Russian "NordsStream2 " pipeline. Understand the price of gas delivered in Europe by Gazprom could easily outcompete any other non-domestic supplier. This is why despite strong pressure from the USA, the EU went ahead with the project.

Dear Niaz Sb,

Thanks for the kind reply, as always your inputs are highly appreciated and cherished. I will try to further expand on it.

I definitely agree LNG will always be costlier than any gas transported through pipeline either IP or TAP, due to number of add on charges, like you said of terminal charges, and on top of it Port charges, Custom Clearance charges, etc. The comparison shouldn't be with end-user prices but with the landfall prices at Pakistan borders, and the dollar amount we are paying to these suppliers. If we are going to consider add on cost for LNG, we should also consider operations & transmission charges incurred on ISGS, which will result in an added tariff.

The combined cost for regasification at our two terminals, if fully utilized for contracted capacity of 1200 mmcfd should come out to be ~$0.4291/mmbtu. The daily combined charges paid to these two is $ 515,000/ day. But since we are under utilizing PGPL, the actual cost varies with number of cargoes it is dealing on per month basis. For the term contracted 2 cargoes/ month of PLL that gets regasified there, cost will be ~$1.1538/mmbtu. For FSRU, we will be receiving 5 cargoes/month from now on against 6 which we were receiving till Dec, 2020, cost will be ~$0.4968/mmbtu against earlier ~$0.4141/mmbtu.

With the current formula including fixed amount, Iranian gas is cheaper than our LNG, which is due to lower JCC price owing to lesser import of crude oil volumes by Japan in 2020, this JCC will not remain cheap this or next year. Also in 2024, when this pipeline is supposed to be commissioned, the LNG market would have been totally changed. Term contracts have already started to use gas-linked benchmarks. The trend in term prices indexed with oil is a steady downward slope of 15 to 10.6% of Brent (from 2014 to 2020). With newer projects coming online, with more and more LNG volumes getting available in market, prices are bound to go down, and we might end up seeing LNG being price at 7-8% slope for term deals in 2023/ 2024 timeline. The viability of Iranian gas at 6.3% slope to JCC with a fixed component makes no economical sense in current and future market scenarios for Pakistan. Iran has to sweeten this deal in order for us to commit to this project. Mere $500 mil loan for construction of Pakistan's portion won't cut it.

The pricing formula is hard to find from open source. One article published in 2007 writes;

"The Iranian gas under the approved formula will translate into $3.67 per MMBTU when the JCC price is $40 per barrel of oil -- a rate least expected given current international prices. The gas price will be $4.3 per MMBTU at $50 per barrel and $4.93 per MMBTU at $60 per barrel.

The gas rate at the Pakistan border will rise to $5.56 per MMBTU when crude prices reach $70 per barrel. The tariff will further rise to $6.56 per MMBTU and $7.06 in case oil prices increase to $80 and $90 per barrel, respectively."

ECC approves price formula: Work on IPI pipeline to begin next month

ISLAMABAD, April 10: The Economic Coordination Committee (ECC) of the cabinet on Tuesday approved gas-sharing with...

www.dawn.com

 

[Dalit]

What happened to our Qatri Brother and their LNG ?

We have a full Iranian Pipeline across from border in Iran and we are begging for LNG and paying millions in fees to Shipping companies

Absolutely get on with IP(C). Shame on us for letting ourselves getting blackmailed by Arabs and Americans.