INTERNATIONAL
Pakistan seeks LNG on credit, reduced price from Qatar
Prime Minister Imran Khan is likely to request the Qatar authorities to provide Liquefied Natural Gas (LNG) worth $4 billion on deferred payment and reduced price to support balance of payment during his two-day official visit to the Arab country.
Pakistan’s annual import bills of LNG is around $4 billion and the premier would ask Doha authorities to extend deferred payment for one year, a government official said, adding that Pakistan State Oil (PSO) is currently paying LNG import bill to Qatar after 15 days.
The official further said that the premier would ask Qatar to give concessional loan like Saudi Arabia and UAE to boost the country’s foreign exchange reserves.
The previous Pakistan Muslim League Nawaz (PML-N) government had inked an agreement with Qatar which proposed revision in gas prices after ten years. The agreement sparked controversy. The policymakers of the time were advised to review price of LNG after five years but the proposal was turned down. The deal was struck on government-to-government basis without going into bidding process.
The ruling Pakistan Tehreek-i-Insaf (PTI) has been criticising the contracts signed by Pakistan Muslim League-Nawaz (PML-N) government for import of LNG from Qatar at a price equivalent to 13.37 percent of Brent offered by Gunvor, a trader company. Later, Pakistan LNG Ltd (PLL) had secured the deal through bidding process with ENI at 11.6 percent of Brent through tender.
The PM would request the Qatar government to match price of LNG with ENI Company which may result in a $4 billion saving to Pakistan during the entire period of contract. He would also entreat the authorities to review gas price after five years instead of 10 years as signed by the PML-N government.
The special audit has revealed that LNG deal with Qatar had resulted in loss of Rs63 billion to the national exchequer in three years and recommended the PTI government to renegotiate price with Qatar before February 2019.
The auditors during the course of audit of Pakistan State Oil (PSO) observed that slope with Qatar Gas which was negotiated at 13.37 percent was much higher and unfavorable for long term agreement executed from February 8, 2016 resulting in loss of Rs63 billion in three years.
They auditors maintained that slope of 13.37 per cent won by Gunvor was lowest in the bidding for five-year contract. The justification that the slope matched with Qatar Gas was not valid and could not be applied in apple-to-apple comparison because of certain reasons.
The auditors pointed out that Gunvor agreement was for five years to bring one cargo of LNG every month whereas agreement with Qatar Gas was for 15 years to bring five cargoes of LNG every month.
The auditors, therefore, said that low price slope should have been negotiated with Qatar Gas in view of the fact that LNG supply market was abundant worldwide.
Secondly, Gunvor is a trader whereas Qatar Gas is the largest producer of LNG globally and had more flexibility and production efficiencies to offer lower prices.
Thirdly, the shipping cost incurred by Gunvor was more as it sourced LNG cargo from around the world. Usually the company followed the route through Nigeria, Australia and Trinidad and reached Pakistan in less than three weeks whereas the consignment from Qatar came in less than three days thus saving at least $1,500,000 on fuel and charter charges over a span of three years.
Lastly, the consultants FGE had recommended that contracts of a shorter duration not exceeding five years should be considered by Pakistan as long term contracts would cost too much.
The auditors observed that Price Negotiation Committee failed to safeguard the interests of the country and did not secure a favourable deal with Qatar Gas despite having LNG supply market worldwide
Earlier, Qatar had shown interest to hire 100,000 Pakistanis for construction & infrastructure related avenues ahead of 2022 FIFA World Cup.
https://tribune.com.pk/story/1893761/2-pakistan-qatari-lng-credit/
