Pakistan, Italy likely to sign LNG supply deal

Italian firm Eni has offered 3 million tons of gas per year

ISLAMABAD: Pakistan and Italy are likely to sign a government-to-government deal for the supply of liquefied natural gas (LNG) as Italian firm Eni has offered to provide gas to Pakistan, according to officials familiar with the development.

Eni has been engaged in exploration activities in Pakistan and has been working since long. Now, it has conveyed to the Pakistan government that it could not continue to explore oil and gas as a profitable business and wants to export LNG. “For this purpose, Eni has taken the Italian government on board and says it will sign a deal for LNG supply on a government-to government basis,” an official said.



It said it could provide 3 million tons of LNG per year. The Pakistan government has sent a draft of the government-to-government agreement it signed with Qatar to Italy for examination.

Pakistan insists it has inked a model LNG agreement that will be offered to other countries. It is waiting for response of the Italian government.

According to the official, the Pakistan government has also cited the benchmark price agreed with Qatar and Gunvor, which is 13.37% of the price of Brent crude oil. Therefore, it will not sign a deal over and above this price.

At present, Pakistan is receiving LNG from two sources. The first source is Qatari state companies with which it has signed a long-term LNG supply deal. The other source is Gunvor that has received a contract for providing 60 ships.

The country is receiving three ships every month from Qatar and one vessel from Gunvor.

Total supply stands at 300 million cubic feet per day (mmcfd) from Qatar and 100 mmcfd from Gunvor. The price for both supply sources was 13.37% of the Brent oil rate.

Gas distribution companies in the country have a pipeline capacity that could supply 400 mmcfd of gas. These companies are currently working to lay new 42-inch pipelines to transport 1.2 billion cubic feet of gas per day. These will be completed by the end of December 2017.



With such developments, Pakistan needs to sign deals with some more potential suppliers of LNG.

According to the official, the government is engaged in negotiations with a Malaysian firm that has offered to supply three million tons of LNG per year. But this company could not provide gas immediately, instead it has conveyed that it will be able to provide gas in 2018.

China has also offered to export LNG to Pakistan that it is receiving from the supplier.

Published in The Express Tribune, May 10^th, 2016.

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