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January 8, 2016

Qatar to respond in 15 days over demand of cut in LNG price


January 8, 2016

ISLAMABAD: Authorities in Doha have promised to come up in next 10-15 days with the response over the demand of Islamabad seeking reduction in LNG price in the light of Economic Coordination Committee (ECC) decision as to whether they agree to accommodate Pakistan or not.

Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi, who visited Qatar on January 6 and came back to Islamabad the same day, told The News, “Pakistan has sensitised the authorities in Qatar about the ECC decision asking for reduction of LNG price to 13.39 percent of Brent from 13.9 percent of three months average price of Brent earlier agreed between the two sides for 15 years under government to government mode.”

Qatar had earlier offered the LNG price at 13.9 percent of three months average price of the Brent which the ECC refused to accept arguing that the Pakistan State Oil has managed the LNG at 13.39 percent of the Brent through tenders, which is why the authorities concerned should ask Qatargas company to match the price that the PSO managed. The ECC wanted to keep itself from any move that can trigger controversy inviting the attention of the National Accountability Bureau (NAB), vibrant media and opposition parties.

Toeing the line of the ECC decision, the minister who headed the delegation comprising Sheikh Imraul Haq, Managing Director of Pakistan State Oil and Mobine Saulat, Managing Director of Inter-State Gas System, in talks with Qatar in Doha also told that if Qatar accommodates Pakistan, then the $16 billion LNG deal will be intact for 15 years with pricing opening clause which is to be invoked after elapse of 10 years.

To a question if Pakistan has taken up for review of the ‘take and pay clause’ mentioned in the SPA (sale and purchase agreement) under which the seller will be having 20 percent liability in case LNG is not delivered or substandard product is delivered to PSO and in case off-spec LNG is delivered where neither PSO nor seller was aware of that LNG was outside specification then the cap on liability will be at 25 percent, the minister said that the said clause would remain the part of the LNG deal with Qatar as such clauses are included in bilateral agreements.

Abbasi clarified that Pakistan did not raise the issue of take and pay clause with Qatar as this clause has mutually been agreed upon. When asked if Qatar did not accommodate Pakistan’s demand of reducing the LNG price to 13.39 per cent of Brent, the price which PSO has managed from Gunvor company for five years till 2020 through tender, then what will be the fate of LNG deal earlier finalised by both sides, the minister said it is up to the response of the top leadership of the country and the ECC as to whether Pakistan should go with the deal or not. However, Pakistan needs four LNG ships in every month from April 2016 and under the plan Qatar was supposed to provide one LNG ship in first week of every month and second in third week of every month.

The Gunvor will provide the LNG in second week of every month under the tender it won at 13.39 percent of the Brent. The Gunvor will provide 60 LNG shipments in five years’ time.

Another international company namely Shell was also selected through tender for providing 60 LNG ships also in five years’ time. Shell company will be providing the LNG in third week of every month at price of 13.83 percent of the Brent.

The minister said Pakistan’s LNG needs will swell to over 4 million tons per annum in March 2017.

Under the deal earlier agreed with Qatar, the LNG price was decided on Slope shape which means that in case the Brent price goes upward, the LNG price would also surge accordingly and similarly, if Brent price tumbles, then LNG price would go also go down. “The LNG price was not decided in ‘S’ shape fearing action from the NAB,” the minister said.

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