NewsJan 06 , 2016
Khaqan dashes to Qatar today to seek reduction in LNG price
By Khalid MustafaISLAMABAD: In a last ditch effort, Pakistan’s team headed by Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi is to leave today (Wednesday) for Qatar to hold crucial talks seeking the reduction in LNG prices keeping in view the ECC decision. In case Qatar is not convinced to bring down the price, the agreed $16 billion government-to-government LNG deal of 15 years will be no more.
The $16 billion LNG deal with Qatar for 15 years was earlier finalised between the authorities of both the countries but failed to get the nod from the ECC.Shaikh Imranul Haq, Managing Director of the Pakistan State Oil and Mobine Saulat, Managing Director of the Inter-State Gas System, would also be accompanying the minister in the LNG talks with Qatar, a senior official at the ministry told The News.
Qatar had earlier offered an LNG price at 13.9 percent of the three months’ average price of Brent, which the ECC refused to accept arguing that Pakistan State Oil has managed LNG at 13.39 percent of Brent through tenders, which is why the authorities concerned should ask the Qatargas Company to match the price that PSO managed at 13.39 percent of Brent. The ECC wants to keep itself away from any move that can trigger the controversy inviting the wrath of NAB, the vibrant media and opposition parties.
“Yes, we are set to re-initiate the LNG dialogue with Qatar given the directions of the ECC headed by Finance Minister Senator Ishaq Dar,” Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi told The News. However, the minister refused to share what kind of issues would be pitched before the Qatargas authorities.
The top officials are of the view that Pakistan will ask Qatar to bring down the LNG price at par with the price that PSO has managed at 13.39 percent of Brent through tender for five years from the Russian company, Gunvor, and if authorities in Islamabad fail to convince their counterparts of Qatargas Company, then the agreed LNG deal will be no more.
Well-placed sources said that Qatar has already shown its displeasure over the non-approval of its offer by the ECC. The Qatargas Company has already criticised the demand of Pakistan seeking a reduction of LNG price which was earlier agreed for 15 years’ time. The relevant officials told The News that the Qatargas Company is likely to show zero flexibility in the upcoming crucial parleys over the agreed LNG deal with Pakistan.
However, the minister said in the upcoming talks over the demand of Pakistan on the LNG price, Pakistan will have to either accept or reject the reaction the Qatari side will come up with.
The minister said that if the LNG price of 13.9 percent offer by Qatar is kept in view, then the landed cost of the product will be $5.70 per MMBTU and if it is brought down to 13.39 percent of Brent, then the delivered LNG price at Port Qasim keeping in view the current price of Brent would be at $5.50 per MMBTU. The minister further said that Qatar has lowered the LNG price for India which is still 20 percent higher than the price at 13.9 percent of Brent offered to Pakistan under the g-to-g mode.
The minister said that Pakistan needed four LNG ships every month from April 2016 and under the plan Qatar was supposed to provide one LNG ship in the first week of every month and the second in the third week of every month.
Gunvor will provide the LNG in the second week of every month under the tender it won. Gunvor will provide 60 LNG shipments in five years’ time.
Another international company namely Shell was selected through tender for providing 60 LNG ships also in five years’ time. Shell will be providing LNG in the third week of every month at price of 13.83 percent of Brent. The minister said Pakistan’s LNG needs will swell to over four million tons per annum in March 2017.
Under the deal earlier agreed with Qatar, the LNG price was decided on SLOPE shape meaning that in case the Brent price goes upward, the LNG price would also surge accordingly and similarly, if Brent price tumbles, then LNG price would also go down. “The LNG prices was not decided in ‘S’ shape fearing the wrath of NAB,” the minister said.
However, under the understanding with Qatar, it was decided in first two years time, 1.5 million tons of LNG in a year (200 million cubic feet per day) would be imported and after two years’ time, 3 million tons of LNG per year (400 mmcfd) would be imported in the remaining 13 years time. Since Pakistan needs 3 million tons from April 2016 which is why PSO issued tenders seeking the import of 120 LNG shipments and got the price of LNG at 13.39 percent of the Brent from international company – Gunvor which will provide 60 LNG ships in 5 years time. The Gunvor will provide the LNG in second week of every month. Another international company was selected through tender, which will be providing the LNG in fourth week of every month at price of 13.83 percent of the Brent.
The ECC wants the LNG deal with Qatar that is negotiated at 13.9 percent of the Brent which is on the higher side should be for five years time and the price should also be matched to the price of 13.39 percent of Brent that Pakistan State Oil has got through tender.
The ECC is also evasive in according approval to the LNG deal with Qatar saying it is not the forum to approve the deal as the Pakistan State Oil can go for such commercial deal on its own. If PSO can give procure the LNG through tenders, then it is eligible to go for LNG deal with Qatar but at 13.39 percent of the Brent not at 13.9 percent of the Brent.
The ECC also expressed its concern over the take and pay clause of the sale purchase agreement under which the seller will be having 20 percent liability in case LNG is not delivered or a substandard product is delivered to PSO and in case off-spec LNG is delivered where neither PSO nor seller was aware of that LNG was outside specification then the cap on liability will be at 25 percent.
Courtesy www.thenews.com.pk
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