ECC likely to give go-ahead to $16b LNG deal with Qatar

Price formula is not clear, but it may be $7.6 per unit

ISLAMABAD: The Economic Coordination Committee (ECC), which is scheduled to meet on Thursday, is likely to approve a proposed $16 billion liquefied natural gas (LNG) supply deal with Qatar, officials say.

The Ministry of Petroleum and Natural Resources has sent a summary to the ECC for approval, but it has not disclosed the pricing formula.



However, officials say, the LNG price has been linked with Brent crude at around 14% of the value of oil, which amounts to $7.6 per million British thermal units (mmbtu).

During the tenure of the previous Pakistan Peoples Party government, Qatar had pressed for setting the LNG price at 14.5% of the value of Brent crude oil, which put the price at $19 per mmbtu. At that time, oil prices were standing above $100 per barrel in the international market, but now they have come down by more than 50%.

The ECC will consider for approval an LNG sale-purchase agreement, which will enable the Ministry of Petroleum to sign a government-to-government deal with Qatar, to be followed by a commercial contract between Pakistan State Oil (PSO) and Qatargas.



Under this arrangement, US energy major ExxonMobil and French giant Total, being shareholders in Qatar Petroleum, will also supply LNG to Pakistan.

According to officials, keeping in view current prices of Brent crude, the value of the potential LNG deal with Qatar will be around $16 billion. The contract will remain in place until December 2030.

However, a provision is also there that allows Pakistan and Qatar to seek price review after 10 years and they will have the right to terminate the agreement if they fail to reach a consensus on price revision.



Under the agreement, PSO will receive 1.5 million tons of LNG per year from Qatargas in the first year and the volume will be enhanced to 3 million tons from the second year.

Liabilities of the seller has been capped at 20% in case of failure to deliver LNG or where off-spec gas is supplied and is accepted by PSO depending on the fact that costs are reasonable and borne by PSO or billed by gas companies.

PSO has suggested that the company will pay port charges in excess of $320,000 and they will form part of the re-gasified LNG as determined by the Oil and Gas Regulatory Authority and notified by PSO.



The ECC is expected to allow PSO to sell LNG to the distribution companies - Sui Northern Gas Pipelines Limited and Sui Southern Gas Company. It may also be authorised to sell LNG to third-party consumers.

Published in The Express Tribune, November 5^th, 2015.

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