Backing out of LNG term cargo: PLL not keen to penalise ENI

ISLAMABAD: The 100 percent state-owned company Pakistan LNG Limited (PLL) is in contact with Italian company ENI that has backed out of its term LNG cargo in August and wants the same cargo in the month of January 2022, a senior official at the Energy Ministry told The News.

“We have managed the term cargo from Gunvor in the current month of August because of the default by ENI. This is a breach of the 15-year term agreement by ENI, which is bound to provide a term LNG cargo every month at the levelized tariff of 12.14 percent of the Brent. The term LNG cargo’s price from ENI stands at $9 per MMBTU, keeping in view the current value of Brent.”

PLL is also in a five-year term agreement with Gunvor -- another LNG trading company at the price of 11.62 percent of the Brent. So, the term cargo from Gunvor, which was to be delivered in January, has been managed in the month of August. To a question, the official said that the 5-year term agreement with Gunvor will expire in June 2022.

“We don’t want to penalize ENI as PLL is exerting pressure on the defaulted LNG company to go for a swap with Gunvor and provide the LNG cargo that was to be delivered in August in the month of January 2022.” The PLL spokesman says that ENI is being asked to provide the LNG cargo in January 2022, which was due in August, and the company is not interested in imposing a monetary penalty.

The official said that ENI has apparently sold out the term cargo for windfall profit in the spot market and wants the PLL to penalize it. The official said that 30 percent of the cargo price is the penalty, which amounts to $9 million and ENI, after paying the penalty, will be in profit of $16 million. “Our estimate is that ENI has sold the term cargo valued at $25 million in spot market at $50 million, keeping in view the prevalent LNG prices.”

However, ENI’s top management, according to the official, told PLL that its supplier -- Eygpt based-EGAS Company did not provide the LNG cargo owing to which it remained unable to provide the term cargo to PLL, which was due in August. PLL says that it is in agreement with ENI not with its supplier. “So, ENI has committed sheer violation of the 15-year agreement.”

PLL and ENI signed a 15-year term agreement in May 2017 under which ENI was to provide an LNG cargo per month up to 2032. Under the deal, ENI was to provide per month cargo at 11.6247% of the Brent for the first two years, 11.95% for the following two years and 12.14% for the remaining 11 years. ENI is bound to provide to Pakistan LNG Limited a total of 180 cargoes in 15 years at the PGPL terminal moored in Port Qasim.