Petroleum Division is reportedly has been asked to explore the possibility of LNG procurement through Saudi Fund for Development (SFD), sources close to Petroleum Minister told Business Recorder.
Chairman Energy Task Force, Nadeem Babar, whose job is to advise the government on fixation of energy sector issues, is now the "key "negotiator of LNG deal with Qatar. One of the members of Task Force, Ashfaq Mehmood, former Secretary Water and Power resigned a couple of months ago due to involvement of the Task Force in policy and administrative matters and delay in Renewable Energy Policy. He, however, wrote in his resignation that he is resigning due to personal reasons.
According to sources, on April 2, 2019 Petroleum Division stated during a Cabinet meeting that at present two LNG re-gasification terminals are operational in the country. Pakistan State Oil (PSO) is importing six LNG cargoes per month (nearly 600 MMCFD), on term contract basis, including five cargoes from Qatar. LNG imported by PSO is re-gasified at the first terminal. At the second terminal, Pakistan LNG Limited (PLL) is importing two LNG cargoes per month (nearly 200 MMCFD) on term contract basis whereas additional LNG imports are made through spot tenders to meet requirements of the country. Thus at the second terminal, a contracted capacity of 400 MMCFD is available for importing LNG on term contract basis instead of spot purchases for better price certainty and gas supply security.
The Cabinet was informed that the Prime Minister, Imran Khan on February 17, 2019 directed to explore the possibility of contracting an additional 200 MCFD of LNG at reduced rates to meet the projected supply-demand gap. In addition, the Cabinet Committee on Energy (CCoE) on February 13, 2019 decided to make necessary arrangements for the import of additional supplies of RLNG to meet the energy requirements of the country.
The sources said pursuant to the Prime Minister's directions, Secretary Petroleum, Mian Asad Hayauddin and Chairman Energy Task Force, Nadeem Babar visited Qatar on March 7, 2019 to explore the opportunity of arranging 200 MMCFD of LNG from Qatar. Based on discussions, QatarGas is willing to provide additional LNG volumes to meet Pakistan's gas demands. A post Qatar visit report was submitted to the Prime Minister's office on March 15, 2019.
The Cabinet was further informed that an Inter-Government Agreement (IGA) exists between the State of Qatar and Pakistan which is effective from March 19, 2015. According to IGA, Qatar Gas Operating Company Limited and Pakistan State oil Company Limited (SPO) are the respective designated entities. Petroleum Division argued that it would be appropriate to assign the task of importing 200 MMCFD of LNG to PSO from Qatar on G2G basis under the existing IGA. A comparative analysis of importing 200 MMCFD of LNG from Qatar by PSO viz a viz PPL was presented.
It was also revealed that to negotiate LNG pricing under G2G arrangements, ECC on October 31, 2016 constituted a Price Negotiation Committee (PNC) with Managing Director PLL as Member/Secretary of the committee. The PNC held various meetings and examined the LNG price offers of seven government-nominated LNG suppliers - Turkish Petroleum International Company (TPIC), Petronas of Malaysia, Oman Trading International (OTI), Eni of Italy, Pertamina of Indonesia, State Oil Company Azerbaijan Republic (SOCAR), Gasprom of Russia in addition to Saudi Aramco Trading Company (ATC) is also keen to supply LNG( 12-18 LNG cargoes per year) under Saudi Fund for Development (SFD) facility over the period of one year. However, Financing Arrangement (FA) signed with Saudi Arabia exclusively covers crude oil and petroleum products and does not mention LNG. For importing 200 MMCFD of LNG from various government-nominated suppliers under respective IGAs including ATC under SFD facility on G2G arrangements, it would be appropriate to designate PLL as a government entity.
It was further stated that PSO and PLL being public sector entities are obligated to procure LNG in accordance with the provisions of the Public Procurement Regulatory Authority (PPRA), Rules, 2004. However, an open competitive bidding process as per PPRA rules may not be followed in the case of LNG suppliers under G2G arrangements. Rule-5 of the PPRA provided exemption from competitive bidding in cases where international and inter-governmental commitments of the federal government are involved. Invoking Rule-5, Public Procurement Regulations 2011 requires that the Petroleum Division bring a case to the ECC to consider and authorize to proceed in terms of Rule-5 of the Public Procurement Rules, 2004.
In order to import additional LNG volumes ( 200-400 MMCFD) from various government-nominated suppliers under G2G arrangements, the following proposals were submitted for consideration of the cabinet: (i) PSO and PLL may import LNG from various government nominated LNG suppliers under the respective IGAs including ATC of Saudi Arabia under the SFD facility; (ii) for importing LNG from ATC, allow LNG to be covered under SFD facility, as the financing agreement does not mention LNG, exclusively; (iii) grant exemption from the requirement of competitive bidding process by invoking Rule-5 of PPRA Rules, 2004 for PSO and PLL; (iv) authorize the existing PNC already constituted by the ECC on December 31, 2016 to negotiate the LNG pricing. PNC may analyze the LNG price keeping in view the prevailing LNG spot prices, market conditions, and Terms of Reference (ToRs); and (v) the period of term contract may be ten years with price review after five years.
After a detailed discussion, the cabinet allowed Petroleum Division to negotiate LNG price and volume with various entities under G2G arrangements and revert back to the cabinet for seeking final approval in the next meeting.
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