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Monday Sep 10 2018
By
GEO NEWS

Pakistan saved $600 million by pitting gas sellers against each other

By
GEO NEWS

Pakistan saved more than $600 million over the first 10 years of a natural gas supply deal by playing gas firms off each other, according to a Pakistan State Oil (PSO) report. 

According to Bloomberg News, the report sheds light on how the 2016 deal came together with Qatar, the world’s largest supplier of liquefied natural gas (LNG). 

After negotiations with Qatar hit an impasse following the country's refusal to lower its offer price for LNG, Pakistan sought leverage on the open market in late 2015. The country publicly sought 120 cargoes in two large tenders, which brought in bids from suppliers including Royal Dutch Shell Plc and BP Plc.

While negotiations with Qatargas Operating Co. were under way, the tender was “issued to fetch maximum number of bidders and best price option,” the presentation said. “The strategy helped bring down prices with Qatargas and saved $610 million."

It was then that Pakistan informed Qatar about the lowest bid, from Switzerland-based Gunvor Group Ltd. The latter agreed to match the bid, however, Pakistan purchased some LNG from Gunvor to award it the first tender. But the volumes sought from the second tender ended up in the final Qatar deal, bulking it up by 25 per cent.

Pakistan emerged as an LNG buyer after the deal with Qatar was eventually settled for 3.75 million metric tons annually over 15 years. Some of Pakistan's factories were forced to shut, resulting in blackouts, due to declining production. 

The country's imports have grown rapidly since early 2016. Pakistan was the seventh-largest LNG buyer globally in August, according to Bloomberg vessel-tracking data.

Lawmakers have criticised negotiations between state agencies and foreign LNG suppliers. Some have claimed that the lack of transparency is hiding potential corruption. 

Concerns of corruption in large-scale awards helped Imran Khan sweep to victory in July. The prime minister promised reform before taking office. He had now pledged to strengthen Pakistan’s accountability bureau, which is said to be conducting an inquiry into the country’s first LNG receiving terminal.

The Senate Standing Committee on Petroleum, which is also looking into other energy-related developments, brought in PSO officials on August 31 to explain the history of the deal. 

Of particular concern to the probing committee is the that the 2016 Qatar contract was negotiated in private and the only publicly available copy is redacted.

Despite PSO’s assertion that it saved money, Mohsin Aziz, the committee head and a member of Khan’s party, said there are still concerns over the deal and will likely recommend the matter for further investigation by government agencies.

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