Economic Co-ordination Committee (ECC) of Cabinet has legalised import of six cargoes of Liquefied Natural Gas (LNG) arranged by Pakistan State Oil (PSO) from Qatargas on government-to-government on FoB bases, on board FSRU in spite of OGRA disagreement on price of four cargoes, official sources told Business Recorder. Ministry of Petroleum & Natural Resources has revealed that while considering its summary of January 12, 2016, a committee was constituted to examine legal and commercial aspects of four proposals which are as follows:
(i) MSPA on FOB/ DES with Qatargas Operating Company may be approved; (ii) section 3.2(a) of the LNG Policy 2011 provided that procurement of LNG by the LNG buyer(s) will be undertaken through direct negotiations with one or more LNG suppliers for a reasonable time to be determined by OGRA. In view of this section of LNG policy, OGRA be directed to approve the terms of the SPA; (iii) the port charges in excess of $320,000 (being the maximum payable by QG2 under the SPA) will be invoiced in the DES price and will form part of price of RLNG/swapped gas as determined by OGRA and notified by PSO; and (iv) since SSGC has already entered into LNG Services Agreement for receiving, storage and re-gasification of LNG with EETPL, therefore PSO will not be required to enter into such arrangement/agreement. The committee was asked to submit a report within ten days.
Accordingly, the committee held its meeting on January 20, 2016 and recommended that Ministry of Petroleum & Natural Resources may place a separate summary before the ECC for obtaining ex post facto approval for procurement of LNG cargoes by PSO from Qatargas signifying its relevance with the Master Sale Purchase Agreement (MSPA).
According to the Petroleum Ministry under the LNG Service Agreement (LSA), SSGC was obliged to pay capacity charges from the commissioning date of the terminal, therefore, it was considered expedient to start import of LNG to synchronise with commissioning of terminal for optimal utilisation of re-gasification facilities. So far, PSO has imported 18 cargoes, out of which first six cargoes were procured from QG2 under the G to G agreement. It was further explained that on June 6, 2015 the ECC had decided that PSO, being a commercial entity, has the autonomy to import LNG either on FOB or C&F basis and take appropriate decisions for import of the LNG at its own level. The ECC, however, directed that the PSO must keep commercial prudence and provision of the relevant rules and regulations in view while making such decisions.
The Ministry further stated that on March 14, 2015, the ECC had allowed PSO to bring a commissioning cargo on board the FSRU on FOB basis. For this purpose PSO entered into FOB MSPA with Qatargas and signed confirmation notice for one cargo on March 19, 2015 for Pak Arab Fertilizer on board the FSRU on FOB basis which arrived at Port Qasim on March 26, 2015. Moreover, in the first week of April, 2015, the Qatargas revealed that Port Qasim was not yet ready to receive Q-Flex whereas the commissioning cargo was expected to be fully re-gasified by mid-April, 2015 and the terminal was entitled to receive a daily capacity charge. Various alternate options both in terms of tenders and Government to Government arrangements were examined by the consultants. As potential options were severely limited given the time constraints, five more LNG cargoes were procured from Qatargas on FOB basis using FSRU as LNG carrier under the confirmation notices signed on April 15, 2015 (for 4 cargoes) and July 2, 2015 (for 1 additional cargo). Out of these, one cargo received on May 11, 2015 was supplied to Pak Arab Fertilizers whereas other four cargoes were sold to SNGPL as per the arrangements between PSO, SSGC and SNGPL. The average slope on delivery ex-ship basis was worked out at 13.36% of Brent for five cargoes while the slope for the remaining 12 cargoes procured through tendering process worked out at 14.5008% (on average) of Brent. For commissioning cargo, the price included freight, boil of gas, loading port charges and gassing of FSRU. It was further explained that the Qatargas had offered (14.30% of Brent) under long term sale purchase agreement on January 30, 2015 and on June 4, 2015 (13.90% of Brent) during which FOB cargoes were contracted. It was further stated that the MSPA was an umbrella document which set out general terms and conditions without creating any binding sale and purchase obligations on the parties. The cargoes sourced from Qatargas were delivered on March 26, 2015, April 24, 2015, May11, 2015, May 28, 2015, June 15, 2015 and July 9, 2015. Out of these six cargoes, two cargoes were delivered to a private customer. The PSO took up the matter with OGRA for price determination of four cargoes but the latter did not agree.
The MoI&P requested the ECC for grant of ex-post-facto approval in respect of six cargoes arranged by PSO from Qatargas under Government to Government arrangement on FOB basis, on board FSRU. After a detailed discussion, the ECC accorded ex-post facto approval of six cargoes.
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