Supply, terminal business: Govt plans to merge two LNG companies

May place its favoured man as head of the merged entity

ISLAMABAD: The government has planned to merge two state-owned liquefied natural gas (LNG) companies that are dealing with multibillion-dollar gas terminal and supply contracts.

Following the merger of Pakistan LNG Limited and Pakistan LNG Terminals Limited, according to an official, state-owned Pakistan State Oil (PSO) will be asked to transfer the handling of 600 million cubic feet per day (mmcfd) of imports from Qatar and commodity trader Gunvor to the new entity.

Despite being the largest oil marketing company in Pakistan, PSO has been heavily dependent on LNG business for the past around three years.

The share of PSO’s oil business had dropped as primary focus of the new management had turned to LNG deals, the official said, cautioning it would be a major setback for the company if it lost its LNG business at this stage.

The merger of the two LNG companies is apparently aimed at placing them under the control of a favoured official of some government circles. Earlier, his appointment as chief executive officer (CEO) of Pakistan LNG Limited had been turned down by former premier Nawaz Sharif.

Adnan Gilani had worked in the Prime Minister’s Inspection Commission and the secretary of ex-prime minister Nawaz Sharif had written a strong-worded note, saying Gilani was not capable of becoming the CEO of an LNG company due to lack of experience.

However later, he was appointed chief operating officer of Pakistan LNG Limited. Under the premiership of Shahid Khaqan Abbasi that came after the disqualification of Sharif by the Supreme Court, Gilani was made CEO of the company.

He has also been given acting charge of Pakistan LNG Terminals Limited following termination of services of CEO Azam Sufi.

The official warned that if the government handed over control of the merged LNG companies to Gilani, it would spark a controversy. He emphasised that a new CEO should be appointed for the company.

Already, two LNG terminals have been built in Karachi whereas two more are in the pipeline and the new entity will be dealing with these terminals as well as LNG supplies.

The government is trying to secure LNG supplies for new gas-based power plants in Punjab. Short and long-term contracts for 200 mmcfd have been agreed and the remaining 400 mmcfd are yet to be arranged.

The government wanted to book this LNG volume through spot purchases, but it received higher bids.

According to a senior government official, Pakistan LNG Limited was forced to cancel deals for two LNG cargo ships some time ago because of higher prices. In response to the bids invited by it, foreign companies quoted prices in the range of 13.2% to 16% of Brent crude oil price.

Now, the government has decided to ink deals with some energy-rich countries in a state-to-state arrangement.

Negotiations are currently under way with Azerbaijan, Russia, Malaysia and Oman. Pakistan had struck its first LNG supply deal with Qatar on a government-to-government basis.

The long-term deal with Qatar was struck at 13.37% of Brent crude price and a contract was also inked with Gunvor at the same rate.

Separately in tenders, Pakistan LNG Limited clinched deals with Italy’s Eni and commodity trader Gunvor at a lower 11.64% of Brent price. This shows Pakistan has got attractive price offers via tenders.

Published in The Express Tribune, April 15^th, 2018.

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