PML-N govt ostensibly accepted ‘strict’ terms for LNG supply deal with Qatar: sources

ISLAMABAD: Initial scrutiny of the LNG supply deal between Qatar and Pakistan initiated by the incumbent minister for petroleum division Ghulam Sarwar Khan has unearthed ‘worrying’ terms and conditions of the agreement signed by the previous government of Pakistan Muslim League-Nawaz (PML-N), said sources.

Sources at the petroleum division have disclosed that an inquiry was launched on the advice of Ghulam Sarwar Khan, present minister for petroleum division. They said that an initial inquiry regarding LNG supply deal between Qatar and Pakistan has completed. And, as per the details of the initial inquiry, the former PML-N government had signed two agreements for LNG supply on strict terms and conditions during its tenure ostensibly to fill the energy shortfall.

They also said that the first deal of LNG supply was made in March 2015 between PSO and Qatargas Operating Company Limited for the supply of Rs10 billion worth four LNG cargos on expansive spot rate while the second deal was inked in February 2016 between PSO and Qatar Liquefied Gas Company Limited for 15 years and incumbent regime of Pakistan Tehreek-i-Insaaf (PTI) can itself neither put an end to a 15-year LNG supply deal with Qatar without the consent of Qatar nor it (PTI) alone can give reduction in the price of Qatari LNG.

Also, Pakistan will have to annually purchase $2 billion dollar worth of LNG from Qatar, and in case of a reduction in LNG purchases against the already set quantity for LNG supply, Pakistan will have to bear heavy penalties worth billions of Pakistani rupees, said sources.

A copy of the long-term LNG sale and purchase agreement between Qatar Liquefied Gas Company Limited and Pakistan State Oil (PSO), dated 8 February 2018, available with Pakistan Today disclosed that Pakistan will have to purchase 3.75 million metric ton of LNG every year till 31 December 2031, starting from 2017.

Qatargas will supply 3.75 MMtpy of LNG to PSO for a period of 15 years. Similarly, a price review is permitted 10 years after the start of supply and a cancellation option could shorten the deal to 11 years if the parties fail to agree a new price.  Likewise, if said two parties fail to agree on the new price of LNG in six months period, then said LNG supply deal will end only after ten years just five years prior to the date of expiry of the LNG deal.

It was also learnt from a 15-year LNG supply deal that the agreement has laid down no uniform price for LNG consignments to be shipped from Qatar to Pakistan. The prices will vary for different consignments and are to be specified through a confirmation notice.

According to the deal, LNG arriving in any particular month will fetch 13.37 per cent of the preceding three-month average price of a barrel of Brent crude oil.

Surprisingly, this agreement is similar to spot purchasing instead of a state-to-state deal. The deal will become ineffective in case of a war that lasts 30 days, floods, civil disobedience or natural calamity faced by either country.

Pakistan shall make payment for LNG before the tenth day after completion of the loading process.

If either party fails to pay an amount due under any invoice, default interest shall be paid at a rate of two per cent per annum above the base interest rate.

The contract price (in US$/MMBTU) of LNG sold and purchased under this agreement shall be the price specified in or determined in accordance with the confirmation notice.

Any disputes, controversy or claim arising out of or in relation to the deal, or the breach, which cannot be resolved by discussion in good faith between the parties within 60 days of the party giving notice of such disputes shall be settled by arbitration under the UNCITRAL (United Nations Commission on International Trade Law) Rules of arbitration in force on the date of the dispute.

It is worth mentioning that the 15-year LNG supply deal between Qatar and Pakistan will be effective till 31 December 2031. And, if both Qatar and Pakistan will want to extend the deal then both parties interest will have to confirm till 29 December 2029 to settle the affairs. Pakistan is asked to keep secret the details of Qatar-Pakistan LNG supply agreement and permission from Qatar will necessarily be solicited in advance prior to make public the said LNG supply agreement.

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Ahmad Ahmadani
Ahmad Ahmadani
The author is a an investigative journalist at Profit. He can be reached at [email protected].
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