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.