LNG deal hits unforeseen obstacle

The much-talked about deal between Pakistan and Qatar on Liquefied Natural Gas (LNG) is reportedly in doldrums as Islamabad has shown an interest in another private party which has offered LNG at lower price for five years as compared to Qatar, official sources told Business Recorder. Ministry of Petroleum and Natural Resources has submitted a long-term LNG Sale and Purchase Agreement (SPA) between Pakistan State Oil (PSO) and Qatargas to the Economic Co-ordination Committee (ECC) of the Cabinet which is yet to be approved despite a passage of four weeks.
"We have received offers from M/s Shell and M/s Gunvor. The offer of M/s Shell is 13.83 per cent of Brent whereas M/s Gunvor has offered 13.37 per cent of Brent for five years as compared to M/s Qatargas which offered LNG at 13.9 per cent of Brent," the sources added.
Ministry of Petroleum and Natural Resources, sources said, will present the entire picture to the ECC headed by the Finance Minister, Senator Ishaq Dar as any decision taken in haste can negatively impact on relations between Pakistan and Qatar. However, one of the members of the committee who negotiated LNG price with Qatar for more than a year told Business Recorder that Pakistan has received two fresh lucrative offers for five years which are comparatively lower compared to Qatar''s and the government is seriously considering their offers.
"We should go for new offers of five years at lower price. Why should we strike a deal for fifteen years? Who knows what will happen after five years?" he added. An official who is also dealing with the LNG told Business Recorder that the ECC can direct the Petroleum Ministry to finalise a deal with Qatar but according to him better sense will prevail and this will not happen.
He argued that the ECC can also direct the Petroleum Ministry to ask Qatar to match LNG price with two other offers, adding that any wrong decision will have political repercussions in future. "The government must proceed very carefully to avoid any untoward situation as the difference of price is not more than 0.5 per cent of Brent," he added. In any case, Pakistan State Oil (PSO) as buyer will strike and execute the SPA along with the LNG supplier.
The agreement with Qatar will be for 15 years and the price of LNG is pegged with oil prices and priced as a direct percentage of Brent; and under current prices the value of potential LNG supply under the SPA is about $16 billion. "We will take a decision which will be in the best interest of the country," said another official on condition of anonymity.