Expensive LNG: Pakistan to pay additional USD 2.5 billion to Qatar

[Peregrine_Falcon]

Compared to which country's offer?

This question doesn't even arises because the competitive bidding process wasn't even held for awarding the contract to qataris for next 15 years

 

[truthseeker2010]

Yeah that's what I have pointed out in the second post ! 13.37% of brent crude ie ~ 7.8 MMBtu ain't that expensive !

it is expensive, but it is according to the international market rate

 

[JustHappened]

Thats Turkish LNG policy in short

The import of LNG started in 1994 from Algeria with the signing of an agreement, and a second source was added in 1999, when Nigeria also signed an agreement. Today, LNG is also imported via spot markets from Qatar, Norway and Trinidad-Tobago.

 

[Peregrine_Falcon]

it is 13.37% of crude oil price, that is around $7 per MMbtu at current price.

The contract has been awarded for next 15 years not even 1,3 or 5 years without competitive bidding which is 2.16% higher than the one by eni so it means corrupt shareef's front-man i.e qatari prince would give 22% higher price as commission to grandsons/grand-daughters of Corrupt Shareef in the form of London flats.So god forbid if oil prices touch $100 for the next 14 years then how much loss pakistan would have to bear?

 

[BATMAN]

This question doesn't even arises because the competitive bidding process wasn't even held for awarding the contract to qataris

I think not even Qatri govt. was invited to bidding and this is clearly hints at corruption.
Whereas, opposition is trolling nation over coen know llecting evidence of money trail in case London flats.
I think opposition is in situation of blackmail, becuase of their dealings with Iran regime.

 

[Peregrine_Falcon]

I think not even Qatri govt. was invited to bidding and this is clearly hints at corruption.

The bidding process didn't even happen at all.The gov't approached the qataris directly and finalised it too for next 15 years not even 1,3 or 5 years

 

[ali_raza]

qataris are all behind money

 

[Hyde]

To be frank with you, by the time this agreement was signed, it was very cheap but the prices of LNG also dropped since last few years alongside crude oil so it sounds unfair in 2017.

Also the Italian company mentioned in the newspaper only signed fraction of the LNG compared to agreement signed with Qatar so their profit/loss/risk margin are lower

 

[Peregrine_Falcon]

To be frank with you, by the time this agreement was signed, it was very cheap but the prices of LNG also dropped since last few years alongside crude oil so it sounds unfair in 2017.

No the agreement wasn't signed according to absolute terms but relative to the crude oil prices and that it was 2.16% higher than the one offered now by Italian company which amounts to atleast 22% higher cost for us and it would remain so for the next 14 or so years becoz Corrupt shareef has signed it for 15 years not even 1,3 or 5 years.

In absolute terms it would cost us much more if god forbid oil prices increase to $100/barrel or more.

 

[Hyde]

No the agreement wasn't signed according to absolute terms but relative to the crude oil prices and that it was 2.16% higher than the one offered now by Italian company which amounts to atleast 22% higher cost for us and it would remain so for the next 14 or so years becoz Corrupt shareef has signed it for 15 years not even 1,3 or 5 years.

In absolute terms it would cost us much more if god forbid oil prices increase to $100/barrel or more.

I know but the contract was cheaper than rivals in the region such as Iran

 

[Mo12]

Also doesnt the credit rating of a nation dictate the price of gas one country wishes to sell to it?

Perhaps another reason why Pakistan (and India slightly) price are high compared to rest of the world?

 

[truthseeker2010]

The contract has been awarded for next 15 years not even 1,3 or 5 years without competitive bidding which is 2.16% higher than the one by eni so it means corrupt shareef's front-man i.e qatari prince would give 22% higher price as commission to grandsons/grand-daughters of Corrupt Shareef in the form of London flats.So god forbid if oil prices touch $100 for the next 14 years then how much loss pakistan would have to bear?

yes the higher 2% is the real catch, that makes it a shady deal, but these deals are long term, therefore there is financial bidding, which here was ignored, if it is to be accepted, but than the lower bidder can go to court and sue the gov, simple as that

 

[SecretMission]

My source says LNG price is not $13.37 mmbtu & original price is around $6 mmbtu.

 

[niaz]

Everyone has 20/20 hindsight. The decision at any given time is made based upon situation at that point in time. One also cannot compare Indian price with Pakistan; even if the contracts are signed at roughly the same time; the supplier may have different reasons for offering different prices.

Since I have spent almost my entire working in the oil industry, perhaps I know a little more than an average person. Permit me to analyse the deal like I would professionally.

Firstly the Pakistan – Qatar LNG deal

ISLAMABAD: The government claimed on Wednesday that it had secured a favourable price of Liquefied Natural Gas (LNG) from Qatar for 15 years under an agreement signed in Doha. The price is lower than offered under comparable gas import options.

In a position paper, the government confirmed that the difference of port charges of $430,000 per ship would be paid by the Pakistan State Oil, instead of Qatargas, and would be recovered from consumers through its sale price.

The paper noted that the Qatar Liquefied Gas Company Limited 2 (QG2), which would be supplying LNG to PSO, would pay $320,000 per ship as port charges against actual charges of $750,000. The difference would be picked up by PSO and made part of sale price.

The PSO would be the LNG buyer delivered ex-ship (DES) at 13.37 per cent of Brent, while QG2 will be the seller from 2016 to 2031. It said that Qatargas had previously offered LNG DES price of $6.56 per MMBTU at $40 price of Brent which had now been reduced to $5.35 per MMBT

http://www.dawn.com/news/1238783


Evidently the deal is $5.35 DES (discharge ex ship) based on $40 per bbl Brent crude. Currently Brent price is close to $56 per bbl; at 13.37% of Brent, LNG price delivered ex ship to Karachi comes to $7.487 per mm Btu.

We must not forget that India is a far larger market and as a rule, bigger the market, the more competition, thus cheaper the price. India imports about 20-million tons a year of LNG and plans to expand the capacity to 50- million tons in next 5 years. Pakistan imports, after expansion of receiving facilities, will still be less than 5 –million tons per year. Understand Pakistan’s deal with Qatar is initially for 1.3-million tons expanding to 2.3-million tons

Looking at India and other world prices as of Dec 2016 per the link below. India has many suppliers, some may be supplying at a lower price, but the average delivered price to India is $8.64 per mm Btu.

https://www.ferc.gov/market-oversight/mkt-gas/overview/ngas-ovr-lng-wld-pr-est.pdf

Regarding the other suppliers. ENI is not a major LNG player. Based upon date available with me, ENI contract portfolio is rather small, a total of 4.7-millin tons in 2015. Admittedly ENI has made some gas discoveries in Africa but it will be quite some time before ENI become a major player in the world market. Qatar on the other hand is the largest LNG exporter in the world exporting about 78-million tons of LNG annually.

Guvnor is a trading company with strong links to Russia. Should the market move and LNG become a scarce commodity, a trading company by nature would maximise its profits and find some clause in the contract to reopen the prices. Besides, Qatar is virtually next door and with less than 5 -6 days sailing time, I would be willing to pay slightly more for the security of supplies. Given the choice and security of supply, any competent manager / entrepreneur would prefer to deal with the producer directly

I am not fan of Nawaz Sharif but I do not like criticism with the ‘Journalist Spin’. Nearly all large suppliers have an office or an agent in Pakistan. Agents only make money when there is business. In my opinion this article has been engineered by agent of ENI in Pakistan who has missed out because the principal did not get the business.

Did NS or his family thru an intermediary benefit from this deal? Probably. But is it a good deal for Pakistan? In my opinion it is. Additionally, please be aware that gas situation is Pakistan is very precarious. Pakistan’s largest ever gas find at Sui is going to disappear in about 10 years and we need more & more suppliers including ENI & Gunvor. If you don’t believe me here is the link.

http://tribune.com.pk/story/417282/alarm-bells-ringing-sui-gas-reserves-to-end-in-10-years/


P.S. 1 mm Btu roughly equals 1000 cft of gas.

 

[SoulSpokesman]

Niaz sb,

Thank you very much, sir. Your posts are always less sensational but more informative.

Regards