Pakistan

Pakistan inks LNG deal worth $16b with Qatar

Commercial contract to be signed with Qatar Gas 2

Zafar Bhutta December 12, 2015

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).

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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.

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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 13^th, 2015.

COMMENTS (12)

S M Anwar | 8 years ago | Reply It is true that the Agreement with Qatar for supply of badly needed LNG to Pakistan. The government calls it a game changer etc I want a clear answer to the following 1.Is there an exit clause to terminate the agreement any time with notice if somehow things don't work out. .2. What penalty Pakistan or for that matter has to pay for premature termination of the agreement. 3 Was any representative of ministry of law associated when this agreement was being worked out.

Attorney Tausif Kamal | 8 years ago | Reply @Osama. Thanks you for your feedback.Yes you do have a valid point about the urgent need for energy in Pakistan. I also agree that contrary to whats claimed in our national media, actually our natural gas reserves are guite modest compared to those of the gas-producing countries of the world. And yes exploration & development tales a longer time that simply importing it and making it readily available. But the overwhelming benefits of producing gas from within coupled with the prohibitive cost in dollars of importing LNG makes it all the more imperative that we should undertake its exploration & development on an expedited basis.Even if we have to import LNG at least we can keep the import duration for as short a term as possible. Hope the GSA is structured to give this flexibility.And of course the legal framework for oil & gas upstream sector has to be streamlined. Thanks

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Osama | 8 years ago | Reply @Attorney Sahab Not that we shouldnt be exploring for new reserves but LNG is at the moment the most viable option for energy starved Pakistan, E&P takes time whereas we needed energy yesterday! Secondly, as much as we claim that we have infinite gas reserves, that is not the case. As far as job creation is concerned, the LNG deal will create jobs to, as industries will start working again once they get continuous supply of gas. The only issue i have with the deal is of pricing, how much have they priced the imported gas. I am not a big supporter of PMLN, but LNG is one thing that i am on the same page with them, given the pricing mechanism they come up with, is fair and not to expensive.

Ali Zaidi | 8 years ago | Reply @Rex Minore: I don't reason with paid trolls who serve their masters biased agenda.

Attorney Tusif Kamal | 8 years ago | Reply So Pakistan will pay 16 billion dollars to buy and import LNG from Qatar. What a huge waste of our country's precious foreign exchange. Only prosperous countries like China or Japan can afford to buy expensive LNG.. Instead of importing this costly LNG Pakistan should have invested only a fraction of $16 billion in exploration and development of significant known natural gas reserves of our own country in Balochistan. That would have not only produced the required natural gas but also created thousands of jobs for us, build infrastructure, saved billions in foreign exchange, developed political cohesion and contributed towards integration of Balochistan. But no. We would rather let people suffer and country bleed in self-destructive policies as these. Thats the story of Pakistan.

Aleem | 8 years ago | Reply With security stability comes economic prosperity. Slowly but surely Pakistan is inshallah on the upward trajectory.

Rex Minore | 8 years ago | Reply @Ali Zaidi: You are a fool to regard $ 16 billion spending a good deal without going through a competitive bidding offer from other suppliers?. What on earth it has to do with the political parties. or individual characters. Rex Minor

Human | 8 years ago | Reply Great news! InshaAllah the way things are looking up, Pakistan would soon be on the way to prosperity. The govt must act maturely and wisely now, and mend its ways. Corruption must go: totally.

GIScientist | 8 years ago | Reply Their is not enough water available for shale gas extraction. Btw, its always about filling already deep pockets.

Ali Zaidi | 8 years ago | Reply Keep up the good work. I must admit PMLN has not only concluded the long term LNG deal but successful inflow of LNG cargoes continue unabated. This is something Musharraf and Zardari miserably failed to achieve in their terms.

Ali S | 8 years ago | Reply Does that mean say goodbye to madrassa reform and NAP?

Mr. Ten Percent | 8 years ago | Reply Wait a minute. What about the shale gas in Pakistan? Who's pockets are getting lined this time?

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