The Petroleum Ministry is said to have been directed by the Economic Co-ordination Committee (ECC) of the Cabinet to prepare a plan to procure additional liquefied natural gas (LNG), possibly through Shell, to bridge the demand/supply gap, official sources told Business Recorder.
Presiding over the ECC meeting on February 9, 2010, Finance Minister Shaukat Tarin also instructed the Petroleum Ministry to complete the quantitative risk assessment study of 'Mashal LNG' project before its formal launching. Giving details, sources said that the ECC in its meeting on January 26, 2010, hsd approved, in principle, the procurement of LNG from suppliers offering lowest bid, and directed that the summary be resubmitted for determining the lowest bidder, covering (i) analysis with comparative chart of prices offered by different companies, (ii) analysis of the various bids with annual cost, and (iii) the Price Negotiation Committee (PNC) should carry out comprehensive assessment, and recommendations of the consultant should also be made part of the report.
It was informed that the final offers of Shell and DGF Suez at varying price level of Brent crude oil showed the projected annual cost as well as the anticipated savings thereof, as required by the ECC decision ie analysis with the comparative chart of prices offered by different companies and analysis of various bids with annual cost. The consultant's report confirmed it, and was also endorsed by the PNC. In pursuance of ECC decision ie PNC should carry out comprehensive assessments and recommendations of the consultant, should also be made part of the report, a confidential report titled "review of LNG supply and terminal proposals" of the consultants Poten and Partners on January 31, 2010 synopsis of consultant's report were also placed before the ECC.
The Ministry of Petroleum and Natural Resources proposed that (i) Shell's offer at 15 percent Brent+ $0.50 per MMBTU, subject to further improvement in the final round of negotiations, be accepted for up to 1 MPTA medium-term supplies of 6 years, (ii) long-term supplies from 7th to 20th year, up to 2.5 MPTA may be procured from Shell at 15 percent Brent+$0.50 per MMBTU, (iii) all other terms should be consistent with the term sheet by the PNC, (iv) award of 2.75 MPTA on medium-term for 6 years and up to 1.5 MPTA on long-term for 20 years at prices (a) medium term supplies at 3.95 percent Brent+75 percent Max (HH/NBP)+1.58 per MMBTU, (b) long-term supplies at 15.2 percent Brent+0.50 per MMBTU, subject to further improvement in the light of the final round of negotiations to be undertaken with DGF Suez, (v) the long-term price is for 10 years and is subject to review for the second 10 year period, (vi) issuance of Stand By Letter of Credit(SBLC) for $50 million or sovereign guarantee as per discussion in the ECC meeting on January 26, 2010, by the Finance Ministry to cover the LNG supplies, (vii) award of Letter of Acceptance(LoA) to '4Gas' for the FSRU in phase -1 at a maximum indicative tariff of $0.50 per MMBTU in accordance with the IRR with '4Gas' by PNC, (viii) the need for conversion of Floating Storage Re-gasification Unit(FSRU) to conventional land based re-gasification terminal will be reviewed in due course, (ix) negotiations for additional volumes if required beyond 6 years, be initiated at the earliest, and (x) the process putting up a second LNG terminal also may be initiated. The ECC discussed in detail the possibility of getting more gas from Iran-Pakistan gas pipeline, GDF Suez and Shell, keeping in view its prices at short-tem and long-term supplies. ECC also noted that Quantitative Risk Assessments Study had yet to be done.
After detailed deliberations, the ECC approved the following proposals, subject to clearance of quantitative risk assessments study: (i) Award of GDF Suez of 2.75 MPTA on medium term for 6 years and up to 1.5 MPTA on long term for 20 years at prices given below: (a) medium term supplies at 3.95 percent Brent+75 percent max (HH/NBP)+ $1.58 per MMBTU and (b) long term supplies at 15.2 percent Brent+ 0.50 per MMBTU subject to further improvement in the light of final round of negotiations to be undertaken with the DGF Suez.
ii) Instead of SBLC, sovereign guarantee for $500 million to be issued by the Finance Ministry to cover the LNG supplies.
iii) Award LoA to 4Gas for 3.5 MPTA FSRU in phase-1 at the maximum indicative tariff of $0.50 per MMBTU, in accordance with the term sheet agreed by the PNC and subject to final conclusion of the IRR with '4Gas' by the PNC.
iv) The need for conversion of FSRU to conventional land-based re-gasification terminal will be reviewed in due course. v) Negotiations for additional volumes if required beyond 6 years be initiated at the earliest.
vi) The process for putting up a second LNG terminal also may be initiated.
The ECC further directed that in view of the demand/supply gap of natural resources, procurement of additional LNG, possibly through Shell, should also be explored and proposal should be resubmitted to the ECC.
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