LNG will cost $5.50 per million British thermal units (mmbtu) after a revised deal with Qatar

[Kabira]

Regarding the Economic Coordination Committee’s permission to Pakistan State Oil to sign a commercial agreement with Qatargas, Abbasi clarified that the accord would be signed after approval of the company’s board of directors.

“LNG will cost $5.50 per million British thermal units (mmbtu) after a revised deal with Qatar,” he said.

The minister stressed that Russia was going to implement the North-South LNG pipeline project on build, operate and transfer basis, adding a new company would take up the project in case some Russian firm was slapped with sanctions.

He made it clear that all sectors including textile mills, compressed natural gas stations and power producers would have to bear the full cost of LNG import. The textile sector was receiving 60 mmcfd of LNG to meet its demand.

Abbasi believes major gas finds will minimise outages - The Express Tribune

Good news right? Because I remember in 2014 price was around $19 per mmbtu.

 

[ssethii]

If true that will surely be a viable option for us to meet our energy demands in the long run.

 

[Kabira]

@niaz sir what do you think of new deal? I remember not long ago Qatar was not going below $13 despite reduction in oil prices.

 

[Viper0011.]

@niaz sir what do you think of new deal? I remember not long ago Qatar was not going below $13 despite reduction in oil prices.

Oil has since come down 50% more.....so it is obvious that the price would be re-negotiated. The only time someone wouldn't re-negotiate the price would be if they got paid to buy higher. At this time, with energy and oil and gas situation, any ME country would give Pakistan a sweet deal as the prices are very low. So naturally, when the government of Pakistan asked for re-negotiations before signing the contract, Qatar didn't have much options and it didn't want to lose a 15 year long customer with billions of dollars in revenue per year. Good work!!

 

[niaz]

@niaz sir what do you think of new deal? I remember not long ago Qatar was not going below $13 despite reduction in oil prices.

I BOE = 5.51 mm BTU. $5.5 per mm BTU means we are buying at $30 per bbl oil equivalent. Music to my ears.

However, what happens if oil market drops to $10 per bbl or goes back up to $60 per bbl?
I am certain there would be a price escalator / de-escalator clause linked to Dubai price or Gas futures quotation at Nymex ( New York Mercantile Exchange).

 

[I FLY HIGH]

I BOE = 5.51 mm BTU. $5.5 per mm BTU means we are buying at $30 per bbl oil equivalent. Music to my ears.

However, what happens if oil market drops to $10 per bbl or goes back up to $60 per bbl?
I am certain there would be a price escalator / de-escalator clause linked to Dubai price or Gas futures quotation at Nymex ( New York Mercantile Exchange).

it is linked to brent oil price. Formula is 13.37%of brent price .

 

[somebozo]

This is Half the price of IP pipe line at $11/MMBTU.
Time to drive the Iranians for a hard bargain!

 

[niaz]

This subject is close to my heart I have been following it closely. Pakistan needed ‘Gas’ not today or tomorrow but yesterday.

Let us now ignore all the criticism and cries of the ‘Scam’. In my humble opinion this is the best price that could have been obtained. Understand that the reason why Qataris were given the chance to match the Shell price being that since Qatar is the largest exporter of LNG in the world; there is more assurance of ‘Security of supply’.

Here is an article which according to best of my info correctly describes the situation.



LNG deal finally

• 
  
  
  
  IT has been a long and difficult road, but finally we are nearing the end. On Jan 13, the ECC gave its approval for a deal for long-term supplies of LNG for Pakistan, and almost immediately some quarters started raising the spectre of corruption.
  
  This whole corruption mantra has become a bit of a reflex for us now. Any deal cut by any government immediately attracts allegations of corruption. Never mind that those raising the allegations themselves, in their time, tried to cut the very same deal, and also faced the same allegations from those who are in government today.
  
  This practice needs to end, otherwise nothing will ever get accomplished in this country. The last time we came close to having a long-term deal for the import of LNG, the corruption allegations were echoed loudly in the media, and the Supreme Court intervened, examining the deal under the magnifying glass before deciding that there was no evidence of corruption there.
  
  From there the deal was sent to the law ministry, that refused to grant the necessary sovereign guarantee and the deal died. It has taken us a decade to recover from that fiasco and get to the point where we have another long-term LNG supply deal, with a functional re-gasification terminal. Let’s not blow it again.
  
  From the details released by the government, the deal is not a bad one. All imported consignments of LNG will be priced at 13.37pc of Brent crude, which is selling at around $32 at the moment. That comes to $4.3 per unit. Add to this various charges, like freight and re-gasification, and according to the petroleum ministry you have a price of $5.5 for the gas in the pipeline. That’s a lot better than what we had a decade ago.
  
  There are still a few questions to be answered. Why did the government show so much deference to Qatar in signing the deal? According to some news reports, Shell had submitted a quote that was lower than Qatar, and the latter was then given a chance to match this quote which they did before the contract was awarded. The end-result is still the same for us, long-term supply of LNG at a decent price, but it does inspire some curiosity about the eagerness to close a deal with Qatar rather than anybody else. Of course, that is assuming that the news reports are in fact true.
  
  Any deal cut by any government immediately attracts allegations of corruption.
  There are also questions about who has the right to the gas once it enters the system. The Sindh government is saying that natural gas is a provincial right, and the federal government does not have the authority to enter into a swap arrangement with parties upcountry without first getting the approval of the provincial authorities.
  
  This is a valid point, but at best it’s an administrative problem. It shouldn’t be used to try and scuttle the deal, but only to give the management of the gas after it has entered the SSGC system sharper focus.
  
  But the real damaging dimension to the story is the chorus of voices we have been hearing since April of last year at least loudly proclaiming that corruption has been committed in this deal. No evidence has been presented by anyone of this, but the allegations were repeated again in September and October, by opposition politicians.
  
  One such episode from the Senate, back in April illustrates the speciousness of the allegations. One senator from the PTI quoted press reports about a wildly high price being negotiated for the LNG. Another alleged that PPRA rules had not been followed. Yet another objected to the capacity charges for the terminal. Another pointed to ‘pressure’ on the MDs of SSGC and SNGPL to sign their portions of the contracts.
  
  None of these allegations, which have been repeated all through the year, hold water when examined. They are purely political slogans. PPRA rules are long outdated and have been bypassed in some of the CPEC deals too. Would the good senator like to raise the slogan of corruption there too? And capacity charges are a universal phenomenon in private-sector energy deals. We can debate if they are too high, but it is a little late in the day to be waking up to the fact that they exist.
  
  One senator from the PTI — Mohsin Aziz — was quoted calling the deal the “mega scam of the 21st century” and “economic terrorism”. Another from the PPP — Farhatullah Babar — reportedly objected to the capacity charges.
  
  The former is engaging in hype. The latter should remember that the IPP contracts signed by the PPP government following the Private Power Policy of 1994 also contained capacity charges, and these were attacked by the next government as some sort of an unfair payment. Now he wants to engage in the same kind of destructive politics from back then? And the PTI has racked up quite a track record of using the idioms of the ‘war on terror’ for purely political purposes. Chaudhry Sarwar famously referred to a withholding tax on banking transactions of non-filers of income tax returns as a “drone attack on the economy” once. This is sheer silliness.
  
  If anybody from the opposition has any actual evidence of corruption in the deal, not circumstantial evidence, or surmising based on an assumption, they should present it. Otherwise the debate around the deal would be better if it focused on the administrative arrangements and legal formalities surrounding it.
  
  The petroleum minister has been roundly criticised all last year for the delays in finalising the deal. But now it is done, and a long-term supply contract for LNG is something that will undoubtedly benefit the country. Now that he has delivered, the attacks should cease and the debate should swivel around to ensuring the best possible arrangements are in place for expeditious delivery of the gas that our people, and our economy, are gasping for.
  
  The writer is a member of staff.
  
  khurram.husain@gmail.com
  
  Twitter: @khurramhusain
  
  Published in Dawn, January 28th, 2016
  http://www.dawn.com/news/1235771/lng-deal-finally