New LNG deal signed with Qatar

Under the 10-year accord Pakistan to import LNG at rate of 10.2% of Brent

Zafar Bhutta February 27, 2021


Pakistan signed a 10-year new agreement with Qatar on Friday to import 200 million cubic feet per day (mmcfd) additional liquefied natural gas (LNG) at cheaper rate.

Under the deal, Pakistan will import 200 mmcfd LNG in first year, and quantity would be increased to 400mmcfd in the next two years. The government says that the price is 31% less than the LNG deal signed with Qatar in 2015 by the then Pakistan Muslim League-Nawaz (PML-N) government.

The PML-N government had signed the deal for 500mmcfd in 2015 at a rate 13.37% of Brent. However, the current PTI government has signed the agreement at a rate of 10.20% of Brent for import of 200 mmcfd LNG.

After the signing ceremony, Special Assistant to Prime Minister on Petroleum Nadeem Babar said Qatar would provide LNG at the lowest rate, following successful joint efforts by the political and military leaderships.

“Today we have signed a very important agreement with Qatar,” Babar said, while sharing with the media persons the details of the agreement, which was signed in the presence of Prime Minister Imran Khan at the Prime Minister House.

The 10-year new agreement, beginning January next year, will deliver initially two ships per month – around 200 mmcfd – and then go up to 4 ships per month -- 400mmcfd. The previous contract was for 15 years, beginning with 1 ship per month – 100mmcfd – and going up to five ships a month.

The agreement signed by the last PML-N government had a clause regarding the price review after 10 years that had invited lot of criticism. However, the fresh LNG contract had a clause for price review after 4 years.

Babar said the average price of total spot purchases stood at 11.9% of Brent, adding that the new price of 10.2% of Brent was still 15-16% lower. He maintained that it would ensure price stability and affordability along with supply security.

Based on the volume of new contract, Babar said that Pakistan would pay around $316million less compared to same volume under the existing long-term contract. He added that this had been calculated at $3 billion during the next 10 years.

“Pakistan is providing letters of credit (LCs) worth $170 million under the past contract. It will furnish $84 million under the new contract that amounts to almost half,” he said. “Total supplies under the fresh contract could be about 3 million tonnes against around 3.75 million tonnes of contracted quantities,” he added.

“The Pakistan State Oil (PSO) will import the LNG from Qatar under the new deal as well, but flexibility has also been incorporated in the contract in case import order is to be assigned to Pakistan LNG Limited (PLL),” he said.

Babar said that the fresh supplies would replace the existing long-term contract with the Gunvor Company that expired in December. Another contract with the PLL will expire in 14 months. “So, the new two cheaper ships will replace two expensive ships,” he added.

The special assistant to the prime minister further said that the new contract would become operational in January, 2022 but added that it also provided for at least one additional shipment “in December this year if need so arise”.

Babar said the process to strike the deal was started around two years ago, when he had accompanied the prime minister during his first visit to Qatar. He added that the agreement was discussed at the highest level of the government.

“It is correct that the deal was discussed at the highest level of the government. The prime minister himself had talked to the Amir of Qatar thrice. It took long time to strike the deal at 10.2% of the Brent, which is the lowest publicly-known contract in the world today.”

Responding to a question, he said that Pakistan’s military leadership also had dynamic relations with Qatar, which had been facilitating in Afghan peace talks. “Both the military leadership and the political leadership have the common interest to do things which are in the larger interest of the nation and it was also one of such joint efforts,” he added.


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