Italian power giant Eni earned $550mn by reneging on Pakistan LNG supply: report

Italian power giant, Eni S.p.A. earned about $550 million by cancelling and then reselling contracted liquefied natural gas promised to Pakistan over the last two years, stated a report published Friday.

The cancellation of contracts worsened Pakistan’s energy situation, according to Bloomberg, which cited an analysis by SourceMaterial, an investigative nonprofit, and Recommon, an Italian environmental group.

Read the SourceMaterial article here

As per the report, Eni, which has a 15-year deal to supply Pakistan LNG (PLL) from 2017 to 2032, failed to deliver a number of scheduled shipments between late 2021 and early 2023 under a contract to supply one LNG cargo a month.

During the almost two-year period, Eni’s LNG ships stopped going to Pakistan and headed to Turkey instead, it was stated in the report. The company denies it benefited and all undelivered cargoes to Pakistan were beyond the reasonable control of the firm, according to Bloomberg.

"Eni does not benefit in any way from the situation," said the company in a statement. "All the previous disruptions in LNG delivery suffered by Eni have been caused by the LNG supplier who didn't fulfill the agreed obligations.

"Also in these cases, Eni did not take advantage or benefit in any way from these defaults and applied all contractual provisions to manage such disruptions."

Meanwhile, in response to questions from SourceMaterial, it termed suggestions it had profited from defaulting on obligations to PLL as “false and unfounded”.

“All undelivered cargoes to PLL in Pakistan were beyond the reasonable control of Eni and were caused either by events of force majeure affecting the relevant LNG suppliers or by disruptions affecting the LNG supply chain,” an Eni spokeswoman told SourceMaterial.

“Eni has not benefited in any way from the situation and has in all cases evaluated and agreed alternative commercial solutions among the affected parties, including supply of replacement cargoes, rescheduling, and deferrals.”

The Pakistan government said “non-supply of LNG cargoes by Eni are a contractual matter covered under the confidentiality provisions", according to Bloomberg.

However, the analysts found that was not the case as the fuel destined for Pakistan was sold to Turkey instead which resulted in over half a billion dollars profit, citing estimates based on prices paid by Turkish gas company Botas at the time.

The report said that in 2022, Botas received 19 Eni cargoes from Damietta; while Pakistan got just one.

“Fossil fuel companies such as Eni want us to believe they are contributing to energy security,” said Alessandro Runci, a campaigner at Recommon. “This investigation shows how their only goal is to secure their own profits at any cost.”

As per Eni's contracts, the Italian power giant was required to pay Pakistan 30% of the originally agreed price for any undelivered cargo. However, the penalties were dwarfed by high spot prices offered in the market in wake of Russia’s 2022 invasion of Ukraine.

“High prices on the spot market make those penalties look insignificant,” a senior industry figure in Pakistan told SourceMaterial.

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Pakistan has struggled to procure spot cargoes of LNG amid elevated global gas prices, which spiked to record highs last year following Russia's invasion of Ukraine.

Pakistan imported 9 billion cubic metres (bcm) of LNG last year, according to Refinitiv data, down nearly 20% from 11.2 bcm in 2021.

Earlier this year, Eni’s delivery of a LNG cargo to PLL that was scheduled for February was disrupted due to an event of force majeure.

"February LNG delivery disruption is beyond the reasonable control of Eni and due to an event of force majeure,” said the company in a statement to Reuters back then.