Pakistan $16b LNG deal with Qatar

[ArsalanKhan21]

LNG supply: Pakistan inks deal worth $16b with Qatar - The Express Tribune

LNG supply: Pakistan inks deal worth $16b with Qatar
ByZafar Bhutta
Published: December 13, 2015
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Commercial contract to be signed with Qatar Gas 2. PHOTO: REUTERS

ISLAMABAD:
Pakistan and Qatar have inked a government-to-government (G2G) deal for the award of a $16 billion contract for LNG supply from a Qatar-based firm without going through the mandatory bidding process.

“The petroleum ministry has now provided details regarding G2G deal with Qatar to import LNG which was effective from March 2015,” officials said. The details of the deal were revealed by petroleum ministry officials to a committee constituted by the Economic Coordination Committee (ECC).

Earlier, the petroleum ministry had sought ECC approval for Pakistan State Oil (PSO) to execute the sales-purchase agreement with Qatar Gas 2 (QG2) as seller following the government-to-government agreement. But the approval was deferred following a question raised by the law secretary about the deal with Doha.

Officials said the law secretary would present a report regarding the LNG deal with Qatar on government-to-government basis in the upcoming meeting, enabling the economic decision-making body to approve the General Sale Purchase Agreement (SPA), a commercial contract to be signed between PSO and QG2. They said that PSO had also imported six cargoes of LNG from Qatar in line with the G2G deal.

Officials said that price of LNG had been linked with a direct percentage of Brent crude oil and under current price of Brent the value of potential LNG supply under SPA amounted to around US$ 16 billion.

The period of contract will last till December 2030. However, a price review provision which allows two parties Islamabad and Doha to seek a price review after ten years has been built in the contract, with the two countries maintaining the right to terminate the Sales Purchase Agreement (SPA) in case they fail to reach consensus on price revision.

Under the agreement, PSO, a public sector company designated by the government, would receive supply of 1.5 million tons of LNG per year from QG2 and the supply would be enhanced to 3 million tons per year from the second year. The core business of PSO is oil but it is now going into a new business line of LNG.

Economic decision making body was expected to allow PSO to sell the LNG to the gas utility companies including Sui Northern Gas Pipeline Line Limited (SNGPL) and Sui Southern Gas Company (SSGC).The PSO may also be authorised to sell LNG to third party consumers.

Qatar had desired in its original plan that Qatargas would supply LNG through their company Qatar Liquefied Gas Company 3 (QG3) under the SPA. However, Qatargas had now proposed for LNG supplies under SPA through QG2.

The new proposed arrangement had deprived US based firm ConocoPhillips to capture Pakistan’s market as shareholder in QG3, which is a joint venture between Qatar Petroleum, ConocoPhillips and Mitsui.

Published in The Express Tribune, December 13th, 2015.

 

[aanshu001]

good news for Pakistan, good luck

 

[ArsalanKhan21]

It is a viable alternative for Iran-Pakistan and Turkmenistan-Pakistan pipelines. This is clear bargaining tool with Iran and Turkmenistan.

 

[Cyberian]

Ma'Shah'Allah. Wow.

 

[niaz]

It says that it is worth $16-billion but what is the PRICE? Long term deals are quite often crude linked. TAPI deal announcement said that price would be 65% of Dubai crude. It is linked to Brent crude! Fine but what percentage of Brent crude?

This is a stupid wishy - washy report.

For the record one barrel oil equivalent is about 5.8-million btu. Current Dubai price is about $35/bbl.

35 x 0.65 / 5.8 comes to 3.922. Thus natural gas from TAPI would be about $4 per mm btu at current price levels.

 

[volatile]

what will be the landed cost at karachi for each MMBTU

 

[niaz]

what will be the landed cost at karachi for each MMBTU

Exactly what everyone would like to know to but the news report does not mention it. Even FOB Qatar price would help. May be the Oil Minister got something to hide?

 

[volatile]

Exactly what everyone would like to know to but the news report does not mention it. Even FOB Qatar price would help. May be the Oil Minister got something to hide?

As i heard earlier it was around 12-14 Cents /mmbtu ,there is too much secrecy but i like the idea of at least securing for 15 years lets c as some local contacts are suggesting in a range of 8 to 9 cents which will be higher than local which is somewhere 6 to 7 cents so too much at stake .Lets see any ways some energy is better than no energy

 

[niaz]

As i heard earlier it was around 12-14 Cents /mmbtu ,there is too much secrecy but i like the idea of at least securing for 15 years lets c as some local contacts are suggesting in a range of 8 to 9 cents which will be higher than local which is somewhere 6 to 7 cents so too much at stake .Lets see any ways some energy is better than no energy

Surely you mean Dollars not Cents! Understand October LNG price to India was about $6.8 per million BTU. Nymex gas is priced at about $2.6 /mm Btu.

Remember we are talking about one million Btu which equates to about 1000 cubit foot.

 

[volatile]

yea my mistake these are all dollar in Pak Rs it iwill be around 800 - 900 Rs /MMBTU where as local sources are some where averaging around 600 Rs .so lets c

 

[ghazi52]

.............................
PSO allowed to sign $16bn LNG deal with Qatar

DAWN.COM
ISLAMABAD: Finally, the government on Wednesday allowed Pakistan State Oil (PSO) to sign LNG Sale Purchase Agreement (LSPA) with Qatargas for import of liquefied natural gas (LNG) of around $16 billion in 15 years at a relatively lower rate.

The decision was taken at a meeting of the Economic Coordination Committee (ECC) of the Cabinet presided over by Finance Minister Ishaq Dar which also allowed export of 600,000 tonnes of wheat at about Rs3.5bn subsidy.

The ECC had been dragging feet to approve the LSPA with Qatar because of difference of opinion over its legalities and higher prices offered by Qatar. On Wednesday, the ECC gave a go-ahead when it was informed that Qatargas had agreed to reduce LNG price to 13.37 per cent of Brent to match a bid received from Russian firm Gunvor for five years.

ECC approves export of 600,000 tonnes of wheat with Rs3.5bn subsidy
PSO and the petroleum ministry had previously initialled an LNG rate of 13.9pc of Brent which was considered on the higher side by majority of the energy sector experts. The sources said PSO also signed an agreement with Gunvor on Wednesday in Karachi for five years at 13.37pc of Brent.

Some critical liabilities of Qatargas would, however, now rest with the local companies and consumers. In its summary to the ECC, the petroleum ministry had requested the government to sign the agreement on the basis of ‘take or pay’ liability on Pakistan and 20pc liability on LNG supplier for its failure or off-specification supplies.

Also, the ministry stated that under the original sales and purchase agreement (SPA), the Qatar Liquefied Gas Company Limited 3 (QG3) was to pay port charges at a minimum of $320,000.

These charges were approved by Oil and Gas Regulatory Authority (Ogra) in its regasified-LNG (RLNG) price early last month at $8.64 per million British Thermal Units (mmBtu).

However, the Qatar authorities now wanted LNG supplies through Qatar Liquefied Gas Company 2 (QG2) whose port charges would be on the higher side. PSO and the petroleum ministry requested the ECC to direct the regulator to allow port charges beyond $320,000 to become part of RLNG.

The summary also reported the LNG supply contract with QG would be on a government-to-government basis for 15 years. It said that “the price of LNG is pegged with oil prices and is priced as a direct percentage of Brent and under current rates the value of potential LNG supply under the SPA is about $16bn”.

Moreover, “the SPA is a take or pay contract and as such PSO will be liable to pay for all the quantities as per the contract” although some mitigating provisions were also part of the agreement.

Conversely, “the seller liabilities under the contract are capped at 20pc in case of non-delivery of LNG or where off-specification LNG is delivered and is accepted by PSO, subject to the fact that the costs are reasonable and incurred by PSO or billed by the gas companies”, the ministry reported.

In case off-spec LNG is delivered where neither PSO nor seller was aware that LNG was outside specification, then subject to the conditions the cap on liabilities is 25pc for the seller.

Moreover, port charges in excess of $320,000 (being the maximum payable by QG2 under the SPA) will be paid by PSO and will form part of price of RLNG or swapped gas as determined by Ogra and notified by PSO. Port charges for QG2 are estimated at about $700,000.

....

 

[v9s]

Currently PSO is taking spot deliveries and the final cost of RLNG to end user (including GST) is $10.44/mmbtu. This price is higher comparatively to imported HSFO price per mmbtu. LNG is priced according to x% of Brent crude, normally less than 15%. PSO's short term deal with Shell and Gunvor have been @ 13.83 percent and 13.37 percent respectively. This should give yo a fair idea on what the price should be.

The shell and gunvor deal is worth $2.5 billion apparently. Calculating the DES price, it's roughly $7/mmbtu.

 

[v9s]

@niaz

ISLAMABAD: Energy giant Royal Dutch Shell is going to lose a five-year liquefied natural gas (LNG) supply contract worth over $1 billion as a Qatari company has agreed to provide the commodity at a lower price to Pakistan.

Gunvor and Royal Dutch Shell had won supply contracts in response to the two tenders floated by Pakistan State Oil (PSO) a few weeks ago for bringing 120 LNG cargoes over a period of five years.

Gunvor offered to bring 60 cargoes at 13.37% of Brent crude price whereas Shell quoted 13.8% of Brent crude price for another 60 cargoes.

During negotiations after the opening of bids, Qatargas agreed to match the price offered by Gunvor, which was the lowest, prompting the government to consider scrapping the contract with Shell and award it to the Qatari company.

This was disclosed in a meeting of the Economic Coordination Committee (ECC) on Wednesday this week, which approved a long-term LNG supply agreement worth $15 billion.

The ECC was told that the government would save a substantial amount by transferring the contract won by Shell to Qatar at a lower price. However, Gunvor’s contract will remain intact.


In the tenders, nine trading firms including commodities giant Vitol, Glencore, Trafigura, Marubeni and US-based Excelerate Energy had submitted bids but all were rejected.

Owing to the plunge in crude oil prices, Shell is focusing on LNG business in the world market. During the previous Pakistan Peoples Party government too, Shell had tried to strike an LNG deal with Pakistan, but failed due to a controversy over the Mashal LNG project, which landed in the Supreme Court.

Pakistan produces 4 billion cubic feet of natural gas per day (bcfd) against demand for over 6 bcfd. The government considers LNG as a fast-track source to bridge the growing energy shortfall.

The lower price offer on the part of Qatar came after Petroleum and Natural Resources Minister Shahid Khaqan Abbasi visited Doha on January 6 and sought a reduction in the LNG rate. Qatar agreed to match the price offered by Gunvor for the short-term supply contract spread over five years.


Earlier, Pakistan and Qatar had finalised a long-term supply deal at 13.9% of Brent crude price. The two sides are going to sign a commercial agreement as the ECC has given the go-ahead. Reports suggested that India had struck an LNG deal with Qatar at the lowest price, but Petroleum Minister Abbasi insisted the Indian price was 20% higher compared to the rate agreed between Islamabad and Doha.

Under the proposed arrangement, the long-term LNG supply contract will be for 15 years, but it will be renegotiated after 10 years. The two sides can end the contract if they fail to develop consensus over the price.

Every three months past price of LNG would be taken to calculate the price with Qatar.

As part of the agreement, PSO will receive 1.5 million tons of LNG from Qatargas in the first year and the annual volume will be enhanced to 3 million tons from the second year.

Shell to lose $1billion contract as Qatar offers Pakistan lower price - The Express Tribune

 

[niaz]

For nearly 10 years Qatar has been the leading exporter of LNG. 2015 exports were about 77-million tons. All others such as Shell and Gunvor are LNG traders. These companies buy LNG from wherever it is surplus and then supply to wherever it is needed.

If the deal is between two gov’t companies without any “in between” such as between KPC & PSO for products, it is less likely to involve commissions. I would welcome such deal if it is really true.

For the record, per World LNG report, top ten LNG exporters are:

1. Qatar: 76.8 million tons

2. Malaysia: 25.1-million tons

3. Australia: 23.3-million tons.

4. Nigeria: 19.4-million tons

5. Indonesia: 16-million tons

6. Trinidad: 14.4-million tons

7. Algeria: 12.8-million tons

8. Russia:10.6-million tons

9. 9.Oman:7.9-million tons

10. Yemen: 6.8-million tons ( Before War started)


Top 10 LNG importers being:

1. Japan: 88.9-million tons

2. South Korea:38-million tons

3. China:20-million tons

4. India: 14.6-million tons

5. Taiwan: 13.6-million tons

6. UK: 8.6-million tons

7. Spain: 8.2-million tons

8. Mexico: 6.9-million tons

9. Brazil: 5.7-million tons

10. Turkey: 5.4-million tons.


Some members may find LNG in tons confusing. Please note that 1-ton LNG = 48,700 cft of natural gas. It means that I-million ton per year LNG would generate about 104-million cft per day of natural gas. Additionally 1-mm Btu (price quoted for LNG) equals 1000 cft of natural gas.

 

[v9s]

For nearly 10 years Qatar has been the leading exporter of LNG. 2015 exports were about 77-million tons. All others such as Shell and Gunvor are LNG traders. These companies buy LNG from wherever it is surplus and then supply to wherever it is needed.

If the deal is between two gov’t companies without any “in between” such as between KPC & PSO for products, it is less likely to involve commissions. I would welcome such deal if it is really true.
.

PSO is the designated buyer for the govt.