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

[farok84]

do you work in the oil/gas industry?

Hi,

Yes, I do. Although not in Pakistan's industry.

 

[Path-Finder]

Hi,

Yes, I do. Although not in Pakistan's industry.

Its Good to have experts in the field present of forum. Where do you work?

 

[farok84]

Its Good to have experts in the field present of forum. Where do you work?

Hi,

I used to work in West, now in GCC.

https://defence.pk/pdf/threads/introduction.507174/

 

[Microsoft]

Hi,
Sure, please find links attached.

https://tribune.com.pk/story/102702...of-approval-for-15b-lng-deal-with-qatar?amp=1

"A top government functionary told The Express Tribune that the ECC approved the price committee recommendation. The committee had recommended the price at 13.39% of the Brent slope, which was lower than the 13.90% price which Qatar had earlier offered. Overall, at the existing rates, the 15-year deal cost would come down to $15.3 billion from the earlier estimated price of $16 billion.

Last week, a report had quoted the petroleum minister as saying that at 13.39% of Brent price, the delivered LNG price at Port Qasim would be $5.50 per million british thermal units (mmbtu).

According to the proposed SPA, in the first year Qatar will supply a minimum 1.5 million tons per annum (mtpa) of LNG which can be increased up to 3 mpta at PSO’s request in the first two years. From January 2018 until December 2031, the volume will be 3 mpta and Pakistan will have to buy the entire quantity or pay the full price."

(If my memory serves right, Brent was around $39-40 mark at the time of contract signage)

https://www.dawn.com/news/1238619

"The annual contract quantity for 2016 has been agreed at a prorate of 2.25 metric tonne while the price for each cargo has been agreed at 13.37 per cent of Brent."


https://www.thenews.com.pk/amp/366554-pakistan-saved-600m-in-qatar-lng-deal-bloomberg

"The contract price of the LNG per million British thermal units is the equivalent of 13.37 percent of the average price of Brent oil futures for the preceding three months"

Original article on Bloomberg, but you might have to sign up to read it.

https://www.bloomberg.com/news/arti...nts-off-each-other-saved-pakistan-600-million

Excellent work sir, it wasn't that I doubted you but just want to have the whole picture, as the questions posed against the information are valid. Perhaps @Path-Finder can edit the original post to include the links which cite this information.

 

[Path-Finder]

Pakistan All Set To Purchase The Cheapest LNG Cargo EVER At A Record Low Price
The SOCAR Trading has placed its lowest proposal to Pakistan LNG Ltd for a liquefied natural gas cargo for delivery in late August.
By Kinza Zahra On Aug 11, 2020
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Pakistan is all set to purchase the cheapest LNG cargo at a record low price.
The SOCAR Trading ( The State Oil Company of Azerbaijan Republic) has placed its lowest proposal to Pakistan LNG Ltd for a liquefied natural gas cargo for delivery in late August.


According to details, the P.L.L. was the lowest bidder, which quoted a rate of *5.7395%* of Brent (around USD 2.2/mmbtu) for the cargo. Prices quoted by the other bidders are Trafigura 10.3811%, PetroChina 8.3500%, Gunvor 7.8421%.

Aug 11, 2020
The P.L.L. received an offer for an August 27th – 28th delivery cargo at about $2.20/mmbtu. It is pertinent to mention here that Pakistan has been out of the spot market in 2020, and this is its first tender since November 2019.

The Managing Director at Khadim Ali Shah Bukhari Securities, A.A.H. Soomro, told a local news outlet, that this is a game-changer. It is a good time for Pakistan to relook at long term LNG contracts and move towards Spot purchase. This solves half of the country’s problems if we speed up the LNG terminals. The economy will increase if we reduce energy prices now.

The new price is lower than the Asian LNG spot price LNG-AS for August, which was estimated to be around $2.35 per mmBtu. The prices are revealed in the report as a “slope” of crude oil prices, a percentage of the Brent oil price.

According to Fitch Solutions, Asian spot LNG prices continue to hover at historical lows as the coronavirus continues to drag economic activity and demand.
LNG imports in Asia have registered large year-on-year declines across the board. Gas consumption across the business and industrial sectors slowed as stern COVID-19 containment measures were followed.


https://blog.siasat.pk/pakistan-buy-lng-cargo-record-low-price/

@volatile what say you?

 

[volatile]

Pakistan is all set to purchase the cheapest LNG cargo at a record low price.
The SOCAR Trading ( The State Oil Company of Azerbaijan Republic) has placed its lowest proposal to Pakistan LNG Ltd for a liquefied natural gas cargo for delivery in late August.


According to details, the P.L.L. was the lowest bidder, which quoted a rate of *5.7395%* of Brent (around USD 2.2/mmbtu) for the cargo. Prices quoted by the other bidders are Trafigura 10.3811%, PetroChina 8.3500%, Gunvor 7.8421%.

Aug 11, 2020
The P.L.L. received an offer for an August 27th – 28th delivery cargo at about $2.20/mmbtu. It is pertinent to mention here that Pakistan has been out of the spot market in 2020, and this is its first tender since November 2019.

How much is the qty they have promised to supply by this contract ?

 

[Path-Finder]

How much is the qty they have promised to supply by this contract ?

The article says for the 'cargo'!

 

[volatile]

The article says for the 'cargo'!

lol Cargo represents how much Gas ?

 

[Path-Finder]

lol Cargo represents how much Gas ?

I dont know, do you know?

 

[farok84]

I dont know, do you know?

Hi,

Each cargo has capacity of 140,000 cubic meter.

"The company sought one cargo for delivery in the August 27-28, 2020 window. The 140,000-cbm cargo will be supplied on a Delvered-ex Ship (DES) basis to the FSRU BW Integrity at Port Qasim, Karachi."

https://www.offshore-energy.biz/socar-bids-lowest-in-pakistan-lng-tender/


Pakistan will be receiving four 140,000 cbm LNG cargoes in months of August and September from different suppliers and at different prices.

1. August 15-16, 2020 - Price 9.3421% of Brent crude oil (PetroChina International, Singapore)
2. August 27-28, 2020 - Price 5.74% of Brent crude oil (SOCAR, Azerbaijan)
3. September 12-13, 2020 - Price 7.9673% of Brent crude oil (POSCO, South Korea)
4. September 25-26, 2020 - Price 6.9511% of Brent crude oil (SOCAR, Azerbaijan)

Note the price SOCAR quoted for the same volume of cargo is 1.211% higher for the month of September.


"Posco offered the lowest bid of 7.9673% of Brent crude oil prices for the supply of an LNG cargo into Pakistan delivered over Sept. 12 to 13, according to a notice posted on Pakistan LNG’s website.

SOCAR Trading placed the lowest offer of 6.9511% of Brent crude oil prices for another LNG cargo to be delivered over Sept. 25-26, according to the notice."

https://www.reuters.com/article/us-pakistan-lng-imports/south-koreas-posco-set-to-supply-lng-to-pakistan-for-first-time-sources-idUSKCN2510VO


These spot purchases are appealing nowadays but are not reliable for catering the long term energy needs. Following is an example from January 2018.


"Gas Natural Fenosa submitted the most competitive bid for the January 11-12 delivery window at 16.25 percent of Brent. The Spanish company also had the best bid for the January 26-27 window at 16.125 percent of Brent, according to the document.

For January 16-17 and January 21-22 delivery windows, Gunvor placed the best bids at 16.4844 percent and 16.8931 percent of Brent, respectively."

https://www.offshore-energy.biz/gunvor-gas-natural-fenosa-place-lowest-bids-in-pakistan-lng-tender/


No consumer can solely bank on spot purchases for a secure, uninterrupted supply chain, and hence the long term contracts were preferred, to assure unhindered economical progress.

 

[volatile]

read my comments these are broken lots

I dont know, do you know?

 

[Shehr Abbasi]

Gas should be free in these rough times. Nonetheless, Nowaz Sheriff would’ve spent 10x the raw price of it.

 

[Musalman]

A question for the forum tooi wal!! why are we forcefully purchasing Qatari LNG? @volatile @Pakistan Space Agency @El Sidd etc..

Spot is available when there is no demand for LNG world wide. While Qatar LNG is a long term energy security contract.

The Very Laiq Mr Ahsan Iqbal Negotiated Very Expensive LNG But Nalaiq Imran Khan and PTI Negotiated Much Cheaper LNG

It was not Qatari LNG but was PMLN LNG

At the time Qatar LNG was negotiated Spot LNG was much expensive. The contract Pakistan did at that time was the best LNG contract of that time. Our negotiated contract price was cheaper when than India.

Why LNG prices decreased?
At the time of LNG contract, there was no World Marine Organization standard on non use of High Sulpher Fuel oil. All most all the world sea liners were fueled by HSFO. But with the new standard of WMO for non use of HSFO, the prices of HSFO hit rock bottom. This resulted in their new demand in the power generation business where it was cheaper to generate electricity on HSFO. This in turn resulted in low demand of gas, resulting in spot being available and at low prices.
Then covid happened where there was gas but no demand at all. The company's wanted to sell the gas so the prices hit low.

So you see, LNG contract made earlier where made with the best intentions for Pakistan at that time. There was no bad intentions nor any wrong doing.

 

[farok84]

Our negotiated contract price was cheaper when than India.

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

At the time of LNG contract, there was no World Marine Organization standard on non use of High Sulpher Fuel oil.

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

There was no bad intentions nor any wrong doing.

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/

 

[Cookie Monster]

So the pissy excuse is, that NOW!! in the present prices are down globally!

BUT that doesn't explain. WHY we are in a CONTRACT to buy LNG from Qatar on a FIXED PRICE!

WHY?

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.