Qatar indicates it will not object renegotiation on LNG deal

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ISLAMABAD: As Pakistan intends to renegotiate the Liquefied Natural Gas (LNG) contract with Qatar, the foreign country has reportedly indicated that it will not object if the new government in Pakistan finds any dubious activity in the contract.

Although the officials at the Ministry of Petroleum did not confirm the reports, reliable sources claimed that Qatar conveyed a message that it will, at least, “not take up the issue before the International Court of Justice for a penalty”. If Pakistan finds lack of transparency in the contract, it can renegotiate despite contractual obligations, they added.

Sources claimed that the Pakistani officials have also been informed that in case there was a lack of consensus on the existing contract, Pakistan could backtrack from the agreement as Qatar already has a standing demand from Indonesia and Malaysia.

The Qatari government has suggested Islamabad not to make the contract a court issue, sources added.

It is pertinent to mention that Petroleum and Natural Resources Minister Ghulam Sarwar Khan had recently said that if any evidence of irregularity, such as violation of the Public Procurement Regulatory rules, was found, the government would renegotiate the LNG agreement. He informed that the National Accountability Bureau (NAB) was actively probing the 15-year liquefied natural gas supply agreement between the Pakistan State Oil (PSO) and Qatargas, signed in February 2016.

NAB Karachi, according to him, was actively investigating the long-term LNG deal with Qatar as well as the award of contract for the first LNG receiving terminal.

Talking about the binding take-or-pay terms of the agreement with Qatargas, the minister argued that India previously renegotiated the off-take volumes and prices of LNG deals with Qatar, Australia and Russia.

Earlier, PSO Managing Director Imranul Haq Sheikh informed a Senate committee that a price negotiating committee had agreed with Qatargas on an LNG price equivalent to 13.37 per cent of the rate, for the benchmark Brent grade of crude oil.

Under the 15-year LNG sales and purchase agreement with Qatargas, the PSO is bound to purchase 3.75 million tonnes of LNG per annum, worth about $2 billion, and would incur penalties if it were to reduce the off-take. Pakistan has the option of renegotiating the deal in 2026, upon the completion of 10 years of purchases. However, if international market prices rose by then, Qatar would also have the option of increasing the price of LNG supplies to Pakistan. If the two contracting parties fail to reach an agreement to extend the deal by five years, it would stand cancelled.

The agreement would remain in force until the end of 2031. If the buyer and supplier wished to extend it by another five years, an agreement would have to be reached by December 2029.

In the event of a declaration of force majeure, the implementation of the agreement could be halted or rescinded. In case of a legal dispute, the case would be referred to a three-man arbitration court in London under the rules of United Nations Commission on International Trade.

After the statement of the minister on the renegotiation of the contract with Qatar, Engro Elengy Terminal Pakistan Limited (EETPL), as per reports, challenged the government’s decision of renegotiating the return on investment agreed with the operator of first LNG import terminal, saying no provision allowed the state to renegotiate the investment agreement.

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