Anjum Ibrahim & Wasim Iqbal
ISLAMABAD: Savings for ten years (2016-2026) due to Pakistan’s success in negotiating the price down from Qatargas offer of 13.90 percent of Brent, made after 7 May 2015, to 13.397 percent of Brent is projected to save the country 610.56 million dollars, according to a presentation made by Pakistan State Oil (PSO) to the Senate Standing Committee on Petroleum and Natural Resources on 31 August 2018, a copy of which is available with Business Recorder.
The comparison between two price offers by the same company to determine savings of over 600 million dollars for ten years is baffling when two competing companies Eni, Italy, and Gunvor, Russia, offered 12.29 percent of Brent for 15 years and 11.62 percent of Brent for 5 years in 2015 according to data released by the Auditor General of Pakistan in a report titled a joint audit special study on LNG deal with Qatar dated 8 February 2018. Incidentally the study raised 32 objections to the Qatargas deal.
PSO contended in its presentation that three procurement streams were utilized for import of LNG to Pakistan: (i) direct government to government negotiations that led to the 8 February 2016 deal between Qatargas and PSO; (ii) spot purchases (14 cargoes imported) with the presentation claiming rates on average higher than the 13.37 percent negotiated with Qatargas on three tenders - one in January and two in February - supplied by GNF, Glencore and Trafigura at 17.9 percent, 18.93 percent and 18.08 percent respectively. However Business Recorder reported a consignment received in March/April 2016 at 5.35 dollars per mmbtu. Additionally Max Gostelow of Platts, a leading independent provider of information, benchmark prices and analytics for the energy and commodities markets for over 100 years, stated on record that prices of spot LNG delivery for April 2016 delivery to Asia averaged 4.46 per mmbtu and that “we are also noticing that the Qataris are growing increasingly competitive on price due to their long term position and offering very good price volumes delivered to their term buyers;” and (iii) term procurement under tendering for 5 year contract with Russia’s Gunvor and that as of 24 August 2018 30 cargoes have been received. No data was provided as to the price on offer by Gunvor for five years in the presentation however as stated above the offer was 12.29 percent of Brent.
The presentation notes that the commercial consultant FGE in a report dated 20 March 2015 maintained that spot is not suitable for a country’s long term energy needs, and the spot market is and always will be volatile depending on seasonal demand and unexpected occurrences; although forecast predict a drop this is not guaranteed. The presentation further maintains that Pakistan needed to secure base load volumes of 15 years for uninterrupted supplies to the newly established RLNG based power plants and the re-gasification terminal had to be supplied a guaranteed volume for a 15 year term otherwise SSGC would be paying idle capacity charges, again a component of the PSO Qatargas deal that was poorly negotiated. In this context it is relevant to note that in 2014 the PML-N government had announced that it would commence construction of several hydel power projects to meet the country’s energy shortage, the cheapest source of electricity, including Dasu, Gomal dam, Kurrum Tungi, Mirani etc. By the end of its tenure on 31 May 2018 the PML-N government claimed that it had added around 10000 MW to generation capacity which implies that the 15 year LNG deal, claiming to have been prioritized for meeting the electricity shortage, was definitely an overkill.
Managing Director PSO Sheikh Imranul Haq, was appointed in May 2015 by Shahid Khaqan Abbasi the then Minister for Petroleum and Natural Resources and his contract ended on 31 August 2018. The presentation was prepared during his tenure and he was present during the presentation to the Senate Standing Committee meeting.
The LNG agreement is on the PSO website however its key parts are redacted. Bloomberg’s report claims that it was allowed access to the redacted portions of the contract which raises the question as to who shared these redacted portions with a foreign media group and not with the domestic media. This too needs to be investigated.
