Featured Pakistan Buys Cheapest LNG (Gas) 230% Cheaper than Qatri LNG

[Musalman]

Hi,

That statement is factually incorrect. India's contracted price is 12.67% of Brent while ours is 13.37%, which is 0.7% higher.


"Qatar sells LNG to India at a price equivalent to 12.67 per cent of the three-month average Brent crude oil price."

Read more at:
https://economictimes.indiatimes.co...ofinterest&utm_medium=text&utm_campaign=cppst

True but you forget to add 60 cent fixed rate in Indian formula, which makes it more expensive. So my statement is correct. Indian 12.67% beats our 13.3% at 110 USD brent.

The IMO regulations to reduce sulphur oxides (SOx) emissions have been around since 2005.


"IMO regulations to reduce sulphur oxides (SOx) emissions from ships first came into force in 2005, under Annex VI of the International Convention for the Prevention of Pollution from Ships (known as the MARPOL Convention). Since then, the limits on sulphur oxides have been progressively tightened.

From 1 January 2020, the limit for sulphur in fuel oil used on board ships operating outside designated emission control areas is reduced to 0.50% m/m (mass by mass). This will significantly reduce the amount of sulphur oxides emanating from ships and should have major health and environmental benefits for the world, particularly for populations living close to ports and coasts."

Read more at:
http://www.imo.org/en/MediaCentre/HotTopics/Pages/Sulphur-2020.aspx

So I am not from the marine business I just happened to know the reason. So thank you for clarifying even further.

Ours forgot to add legal provisions for a force majeure during epidemic and quarantine conditions, India didn't and have invoked it recently. What about 'take or pay' clause which gives us no volume flexibility, we have to buy 3.75 mtpa or pay for them. Did we have storage or regasification capacity for such quantities at the time of contract? We don't have a barometer to judge their intentions but there were certainly wrong doings in the Qatar contract.


"Although the government had desired to postpone the supply of LNG from Qatar by claiming force majeure, there was no legal provision in the multi-billion dollar Pak-Qatar LNG deal other than decreasing the agreed quantity of LNG.

“Owing to no legal provision of force majeure in $16-billion LNG sale and purchase agreement between Pakistan and Qatar, the former cannot stop the import of LNG from the latter,” an official confirmed."

Read more at:
https://profit.pakistantoday.com.pk...mport-from-qatar-amid-decline-in-consumption/

Ours has the force majeure provision, no contract is without the force majeure provision. I don't think Pakistan Today statement is factually correct.
I agree should have been invoked. So its the wrong doing of present govt. not the previous one.

 

[hussain0216]

now govt should also provide relief to public as utility bills are much higher these days and also sngpl is at verge of becoming loss making organisation

How much problems can IK and govt fix when idiots can't even wait for 1 term to fix 70 years worth of corruption

 

[Yaseen1]

every govt has such excuses,in Pakistan consumption of gas is much less as compared to western countries where cold weather is extreme and has long span so it is not difficult to fix such issues provided govt is capable and honest

How much problems can IK and govt fix when idiots can't even wait for 1 term to fix 70 years worth of corruption

 

[farok84]

True but you forget to add 60 cent fixed rate in Indian formula, which makes it more expensive. So my statement is correct. Indian 12.67% beats our 13.3% at 110 USD brent.

Hi,

I didn't forget as I can't find a reference to additional fixed price of 60 cents/mmBTU. I will appreciate if you can guide me to a reference quoting such, and I will be happy to stand corrected. The article I quoted does not mention of such an arrangement nor any I can dig up on internet. It will be a very unusual contract, if such an arrangement exists.

Current price of Brent is $45.15, I don't understand reference to $110, Brent was in between $30-54 in 2016.

India's price (@12.67%) is $5.72/mmBTU
Ours (@13.37%) is $6.04/mmBTU

So I am not from the marine business I just happened to know the reason. So thank you for clarifying even further.

I was trying to clarify that the IMO regulation was present since 2005, so at the time of contract, it was known to all parties. Also, note, we did float a spot buy tender in September/ October 2017 for January 2018 deliveries, and the price quoted was above 16%, so this increase in demand for HSFO seemed to have less bearing on our LNG contracts. (I have shared the link to the article quoting the price in earlier post)

Ours has the force majeure provision, no contract is without the force majeure provision. I don't think Pakistan Today statement is factually correct.
I agree should have been invoked. So its the wrong doing of present govt. not the previous one.

Yes, force majeure is in-built in all contracts, at-least it is supposed to be. But the contracts do clearly define the parameters and the conditions in which force majeure can be invoked. In the absence of such clarity, PTI decided to negotiate with Qatar and instead of irking them, they resolved the issue without causing a legal embarrassment for Pakistan.

Pakistan Today statement was pointing out towards such opacity of the terms and conditions of the contract, which limits the government to exercise force majeure (during epidemic and quarantine conditions) without facing litigation from supplier. They avoided the whole unpleasant episode by quietly convincing Qatar to drop number of cargoes from 5 to 3, during the month of April or May. Hence reducing the volumes, that can be purchased from spot buys at cheaper rates.

The opacity in the Qatar contract favors highly the supplier (QG2/ Exxon), which raises the question of ill practices and ample wrong doings by the previous government.

I also raised issues like, i) take and pay clause and ii) the volumes sought per year through this contract (without appropriate storage or regasification capacity). These two if deliberated at without prejudice should also talk volumes of corrupt practices our previous government was indulged in.

 

[Musalman]

Read about Indian prices . I can assure you its plus 60cents
Usually G2G contracts are classified. So i can not show you the Indian one nor Profit can get hold of Pakistani.
Regarding IMO, these things have been over looked. You see demand supply projections in Pakistan are made on a very rudimentary basis. I'll call it incompetence rather than any other thing.

 

[CrazyZ]

Spot prices can be very volatile. There low now but could shoot to the moon if there is any issues. A long term contract with a reliable supplier reduces exposure to price spikes and is a good thing as long as its priced correctly.

 

[farok84]

Read about Indian prices . I can assure you its plus 60cents
Usually G2G contracts are classified. So i can not show you the Indian one nor Profit can get hold of Pakistani.
Regarding IMO, these things have been over looked. You see demand supply projections in Pakistan are made on a very rudimentary basis. I'll call it incompetence rather than any other thing.

Hi,

Thanks for the reply.

I did try to look into Indian prices, but couldn't find anything from open source. I agree we can't get hold of G2G contracts, that's why we base our arguments on publicly available data. If such an arrangement does exist, it will be a very strange contract. I wonder why Indian opposition is not vociferous on this.

Its sad to see too many things get overlooked while drafting these contracts. Whether its a mere overlook or sheer incompetency, someone should be held accountable. These snafus have costed Pakistan millions if not billions.

 

[Path-Finder]

I'm no PMLN supporter...but usually the way it goes with long term fixed price contracts...there are two possibilities...
1) over time the price goes up in the market...which would be beneficial(bcuz we r paying a lower price)
2) over time the price goes down in the market...which would be detrimental(bcuz we r paying a higher price)

So while it's valid to question the pros and cons of long term fixed price contracts...and whether or not a government should sign such contracts...
...but to score a point bcuz the price has now gone down(COVID19 having played a major part)...that's a bit unfair...as no one can see the future. It could very well have gone the other way...and the price could've gone up for LNG in the international market.

you see, from what I know and I am no expert. we entered a contract and that contract is NOT fair despite tooi wal making all sorts of excuses. The LNG market is saturated. you can tender and get the best bang for your buck so entering a contract that has certain claus that puts Pakistan in a worse off place is NEVER acceptable.