After Italy, Pakistan in talks with France for LNG supply

ISLAMABAD: Pakistan and France are engaged in negotiations for a government-to-government contract worth billions of dollars for the supply of liquefied natural gas (LNG) to Islamabad, officials say.

The French government has designated state-run energy company GDF Suez, renamed as Engie, for signing a commercial contract with energy-starved Pakistan. This is the second European country after Italy that is holding talks with Pakistan for LNG supply.



The Italian government has nominated its energy giant Eni to clinch an LNG contract as the company is already engaged in oil exploration business in Pakistan.

Eni is eager to start supplies immediately and to pave the way for a commercial contract. The government of Pakistan has sent draft of a state-to-state deal to the Italian government.

“Pakistan has prepared and forwarded a separate contract draft to France as well,” a senior government official said.



Engie is making another attempt to secure an LNG deal in Pakistan. During Musharraf and Pakistan Peoples Party governments, it had tried to win a $25-billion contract but because of reports of alleged corruption during the process, the project landed in the Supreme Court and later the PPP administration shelved it.



During the Musharraf rule, state-run gas utility Sui Southern Gas Company floated a tender for the scheme called Mashal LNG project, which was won by GDF Suez.

However, the Supreme Court took notice of the deal during PPP’s rule and directed the government to place the matter before the Economic Coordination Committee. Then law minister Babar Awan did not clear the project and GDF Suez had to abandon it.

It was an integrated project under which the French company had to supply 3.5 million cubic feet of LNG per annum and Netherlands-based 4Gas had to build a terminal.

The scrapping of the Mashal LNG project caused a loss of $3.6 billion to the national exchequer due to the price difference between LNG and furnace oil. 4Gas claimed at that time that it had spent $12 million since participating in the tender in May 2006.

“This time, the PML-N government is pushing France to strike a government-to-government LNG supply deal,” the official said.

At present, Pakistan is receiving LNG from two sources. First is Qatar state companies that have signed a long-term LNG supply deal. The other source is Gunvor that has got a contract for providing 60 LNG ships.



Three ships arrive in Pakistan every month from Qatar and one vessel is sent by Gunvor.

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

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

Published in The Express Tribune, May 26^th, 2016.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.