Pakistan saved $600m in Qatar LNG deal: Bloomberg

ISLAMABAD: A Bloomberg news report has confirmed what the Pakistan Muslim League Nawaz government had claimed that the LNG supply deal with Qatar saved the national exchequer millions of dollars.

A report from the Pakistan State Oil presented two weeks ago to Senate Standing Committee on Petroleum, and reviewed by the US financial daily, details how the 2016 deal came together with Qatar, the world’s largest supplier of liquefied natural gas.

Pakistan said it saved more than $600 million over the first 10 years of a natural gas supply deal by pitting some of the world’s biggest sellers against each other.

The Bloomberg report stated: The maneuvering by Pakistan came after two years of negotiations hit an impasse as Qatar refused to lower its offer price for LNG. So Pakistan sought leverage on the open market in late 2015, publicly seeking 120 cargoes in two large tenders, which brought in bids from suppliers including Royal Dutch Shell Plc and BP Plc.”

While negotiations with Qatargas Operating Co. were under way, the tender was “issued to fetch maximum number of bidders and best price option,” the presentation said. “The strategy helped bring down prices with Qatargas and saved $610 million."

Pakistan then informed Qatar about the lowest bid, from Russia’s Gunvor Group Ltd., which the Middle East supplier agreed to match. Pakistan still purchased some LNG from Gunvor, awarding it the first tender. But the volumes it sought from the second tender ended up in the final Qatar deal, bulking it up by 25 percent.

Senator Mohsin Aziz from the ruling Pakistan Tehreek-e-Insaf party, confirmed the details of the presentation to Bloomberg but insisted that the government would probe the matter further.

The redacted portions of the contract, which were also reviewed by Bloomberg, include the following:

• 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
  
• Pakistan can increase or decrease the size of the contract by five cargoes a year, equivalent to about 8 percent
  
• The parties can’t renegotiate the price for 10 years
  
• Pakistan can sell cargoes to other buyers and divert to other terminals
  
• Port charges to unload cargoes for seller can’t exceed $320,000