Home > Much-awaited: Pakistan close to clinching $16b Qatar LNG deal

Much-awaited: Pakistan close to clinching $16b Qatar LNG deal

ECC set to give its stamp of approval to energy supply contract. PHOTO: REUTERS

ECC set to give its stamp of approval to energy supply contract. PHOTO: REUTERS


Pakistan and Qatar are getting closer to sealing a $16-billion liquefied natural gas (LNG) supply deal as the Economic Coordination Committee (ECC) is expected to give the go-ahead to the proposed energy contract.

Under the deal, US energy giant ExxonMobil and French firm Total, which have shareholdings in Qatar Petroleum, will also supply LNG to Pakistan.

According to discussions with different officials, the ECC will consider an LNG sale-purchase agreement in its upcoming meeting and its approval will allow the Ministry of Petroleum and Natural Resources to sign a government-to-government contract with Qatar. This will be followed by a commercial agreement with Qatargas, the world’s largest LNG company.

The petroleum ministry had sought the ECC’s nod to clear the way for Pakistan State Oil (PSO) to execute the sale-purchase agreement with Qatargas following the government-to-government deal.

“A summary has been sent to the ECC for consideration in its next meeting,” said Petroleum and Natural Resources Minister Shahid Khaqan Abbasi while talking to The Express Tribune.

“The LNG supply contract will be worth $16 billion keeping in view the existing price of Brent crude oil,” he said, but did not disclose the pricing formula.

According to the officials, the contract will remain in place until December 2030. However, a price review provision will be there that will enable Pakistan and Qatar to seek the price review after 10 years and they will have the right to terminate the sale-purchase agreement if they fail to arrive at a consensus on the price revision.

Under the proposed agreement, PSO will receive 1.5 million tons of LNG from Qatargas in the first year and the annual volume will be enhanced to 3 million tons from the second year.

PSO, a state-owned company whose core business is oil import and its marketing, is now entering a new arena where it will receive LNG cargoes and provide them to the gas transmission companies.

According to the officials, the ECC is expected to allow PSO to sell LNG to the two gas distributors – Sui Northern Gas Pipelines Limited and Sui Southern Gas Company. PSO may also be authorised to provide LNG to third-party consumers.

In the original plan, Qatar had desired that Qatargas would supply LNG through its venture Qatar Liquefied Gas Company 3 (QG3) under the sale-purchase agreement. However, now Qatargas has proposed that LNG should be supplied through QG2.

The new proposal will deprive US-based ConocoPhillips of an opportunity to capture Pakistan’s market as a stakeholder in QG3. In QG3, Qatar Petroleum has a 68.5% stake, ConocoPhillips has 30% shares and Mitsui & Co has 1.5% shareholding.

QG2 is the world’s first fully integrated value chain LNG venture. It includes two world-class LNG trains with a capacity of 7.8 million tons per annum (mtpa) of LNG, 0.85 mtpa of liquefied petroleum gas, 90,000 barrels per day of condensate production, a fleet of 14 ships and a receiving terminal.

The project includes 30 offshore wells and three new platforms in Qatar’s North Field. This is a joint gas field with Iran from which Pakistan is also likely to buy natural gas under a gas pipeline project.

Published in The Express Tribune, October 28th, 2015.

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