New LNG deal with Qatar: Pakistan to get 450 cargoes at rate of 10.13pc of Brent

ISLAMABAD: Pakistan will import 450 cargos in 10 years from Qatar under a new LNG deal at the rate of 10.13 per cent from January 1, 2022 though the deal is done at 10.20pc of the Brent.

The port charges per LNG cargo at Qasim Port stand at $620,000-$750,000, but the Qatargas pays port charges of $320,000 on its one cargo and the remaining is paid by the PSO. However, now under the new LNG deal, the Gasgas will pay $400,000 and the remaining will be paid by the PSO and this is how the state-owned entity will have a solace of $80,000 per cargo that will help reduce the tariff of LNG with effective rate of 10.13 per cent of the Brent. And just under the head of port charges relief from Qatar, Pakistan will be able to have solace of $38 million in 10 years.

Nadeem Babar, special assistant to PM on Petroleum, stated this in an exclusive talk with The News here. He said the deal done with Qatar is the best one which is publically disclosed. However, he said that 5-6 months back, the same deal was done with China at 10.2 per cent of the Brent but for one cargo in a month. However, Pakistan will import primarily 1-2 cargos per month. Then it will be increased by up to 4 cargoes per month from 2024 onwards. He dispelled the impression that an LNG deal with Bangladesh is also done at 10.20 per cent of the Brent, saying that it is above 11 per cent of the Brent. He said that prior to January 1, 2022, the two state-owned entities Pakistan LNG Limited (PLL) and Pakistan State Oil (PSO) will either be merged with the surviving entity of PSO or PLL and will be made subsidiary of PSO to utilize the two LNG terminals one owned by Engro and other owned by PGPCL. To a question, the SAPM said he never opposed the long-term LNG deal but he used to raise certain objections about terms of the 15 years agreement done by the PML-N government in the past such as the provision of the price review clause under which the price will be negotiated after 10 years. He said the PTI government has also inked the deal for 10 years but with the clause of review of prices after 4 years. He said that in the next 3-4 years, the LNG producing countries such as Qatar, Australia and Russia are going to increase their capacity to produce more LNG for the world market which will help reduce the price of the product in the world market and there are many chances that after 4 years, there will be a slight reduction in LNG prices.

He, however, in the same breath also opined, saying that if the demand for LNG gets increased after four years along with the increase in production, the LNG price may continue to remain the same. However, in nutshell, after four years, Pakistan will attain the price that will be hovering at that time in the market. Babar termed the comparison of prevalent spot purchasing price of 10.04 per cent of the Brent with the deal at 10.20 per cent for 10 years as intellectual dishonesty arguing that sport cargoes prices fluctuate on a daily basis. However, it can be compared with annual average price of spot cargoes for 10 years.

When asked why not the PTI government has attempted for price discovery as was done by the PML-N government for getting more better price, Babar responded that after finalizing the price with Qatar over 14 per cent of the Brent, the then government issued a tender for five years and an LNG trading company Gunvor came up with 13.37 per cent of the Brent. He also built his argument posing a question that the then government should have gone for price discovery by comparing the price offered by Qatar with the bid from another LNG producing country, not from the LNG trading company.

He said the LNG trading company gets the product from the LNG producing country and then sells it with its margin of profit. He said that under the 15-year agreement done by the PML-N government, the country will get 900 LNG cargoes and under the deal with the Gunvor, it got 60 cargoes and how the price of 900 cargoes can be compared with the price of 60 cargoes. He raised the ability of the then team to negotiate, saying that the price of 900 cargos in 15 years should have been somewhere at 12 per cent of the Brent. Babar said that the claim of the PML-N government that it did the best deal at 13.37 per cent of the Brent is not right as at that time many countries had done better deals with Qatar. He also mentioned that after the 15-year deal, it also inked a deal in 8-10 months with ENI another LG trading company at 11.86 per cent of the Brent.

He said PML-N government functionaries had not negotiated well despite the fact that they started negotiating with Qatar authorities from 2014. Babar reiterated that he and his team did well and managed a good deal at 10.20 per cent of the Brent.