Friday, February 19, 2016

Assessing Qatar-Pakistan LNG Deal

Pakistan has recently negotiated a good bargain with Qatar for importing $16 billion worth of liquified natural gas (LNG).

Pakistan will import as much as 20 million tons of the super-chilled gas annually from various sources including Qatar, enough to fuel about two-thirds of Pakistan’s power plants. Gas shortage has idled half the nation’s generators. A 75 percent drop in LNG prices since 2014 has  dramatically reduced the cost of the South Asian country’s energy needs, according to a Bloomberg report.

LNG arriving in Pakistan from Qatar will fetch 13.37% of the preceding three-month average price of a Brent barrel (considering the present Brent price as a proxy, that would equate to $167.5 per 1000 cubic meters), according to a report in Azerbaijan's Trend News.  It translates to $4.50 per million BTUs.

A comparison with Iran's gas deals with Turkey and Iraq indicates that Iranian gas will not be competitive with Qatari LNG on Pakistani market. In 2014 Iran was exporting gas to Turkey at above $420 per 1000 cubic meters, but the figure plunged to $225, or $6 per million BTUs, currently due to low oil price. Iran previously said that the price of gas for Iraq would be similar to Turkey's price.

International Chamber of Commerce (ICC) arbitration court has recently ordered Iran to reduce its gas price to Turkey by 15% after Turkey complained. It's not clear if Iran will comply but even if it does, its price will still be $5.10 per million BTUs, much higher than the Qatari LNG price of $4.50 per million BTUs for Pakistan.

As recently as two years ago, LNG shipped to big North Asian consumer like Japan and Korea sold at around $15 to $16 a million British thermal units. Late last year, the price hit $6.65 a million BTUs, down 12% from September, according to research firm Energy Aspects. It expects prices to fall further in Asia this year, to under $6 per million BTUs, as a wave of new gas supply in countries from the U.S. to Angola to Australia comes on line, according to Wall Street Journal.

 Petronet LNG Ltd, India’s biggest importer of liquefied natural gas (LNG), is saving so much money buying the commodity from the spot market that it’s willing to risk penalties for breaking long-term contracts with Qatar.

Will Pakistan be able to negotiate a better price with Iran? It seems difficult given the fact that Iranians have a reputation of being very difficult to deal with. Here's an excerpt about Iranians' negotiating style from Iranian-American author Vali Nasr's book "The Dispensable Nation":

"I remember a conversation in 2006 with Jack Straw, who was then Britain’s foreign secretary, about his time talking to Iran. He said, People think North Koreans are difficult to negotiate with. Let me tell you, your countrymen [Iranians] are the most difficult people to negotiate with. Imagine buying a car. You negotiate for a whole month over the price and terms of the deal. You reach an agreement and go to pick up the car. You see it has no tires. “But the tires were not part of the discussion,” the seller says. “We negotiated over the car.” You have to start all over again, now wondering whether you have to worry about the metal rim, screws, or any other unknown part of the car. That should give you a sense of what talking to Iran looks like".


Source: US EIA
Regardless of whether Pakistan succeeds in using Qatar price leverage with Iran. it's good to see Pakistan finally beginning to take advantage of historic low gas prices to alleviate its severe load-shedding of gas and electricity.

Growing Demand-Supply Gap in Pakistan

In addition to signing the Qatar LNG deal, Pakistan has launched its first LNG import terminal in Karachi and started receiving shipments from Qatar. Pakistan has also signed a $2 billion deal with Russians to build a north-south pipeline from Gwadar to Lahore. But the country needs to rapidly build up capacity to handle imports and distribution of significant volumes of LNG needed to resolve its acute long-running energy crisis.


Here's a related video discussion:
http://dai.ly/x3ccasi



Pakistan Local Elections; Indian Hindu... by ViewpointFromOverseas


https://vimeo.com/144586144



Pakistan Local Elections; Indian Hindu Extremism; LNG Pricing; Imran-Reham Split from WBT TV on Vimeo.


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9 comments:

Riaz Haq said...

Under the (LNG) agreement (with Qatar), the LNG price with QG2 could be reviewed once, after the 10th anniversary of the start date. In case of failure of price review, either party could terminate the agreement with effect from the end of the contract year in which the termination notice was served. Simply put, the minimum supply period under the agreement would not be less than 11 years.
The price agreed for each LNG cargo discharged in a particular month is 13.37pc of preceding three month average of Brent value. Annual contract LNG quantity for first year (2016) would be prorate of 2.25m tons and first quarter of 2017 after which the quantity would be increased to 3.75m tons per annum beginning second quarter of 2017.
The long-term agreement also provides for annual upward and downward flexibilities of up to three LNG cargoes per contract year. Downward flexibility can be accumulated for two contract years. Under the ‘take or pay’ clause of the agreement, Pakistan is required to take full contracted LNG or else pay full cost even if it fails to receive LNG quantities for any reason. The PSO would be required to make full payment 15 days after the completion of LNG unloading.
In order to ensure that the payment is made within 15 days, the PSO would provide Standby Letter of Credit to Qatargas at 105pc of the value of four LNG cargoes during the first year. From second year onwards, the PSO would provide the letter of credit of 105pc of the value of six cargoes.
The government said it had also carried out a price comparison of all long-term gas import options, including previous LNG import attempts at indicative Brent price of $40 per barrel, suggesting that LNG import from Qatar would be the lowest.

It said the delivery ex-ship price of LNG under the Mashal Project terminated following court disputes at $40 per barrel worked out at $6.94 per MMBTU.

The price of integrated LNG import project at $40 Brent (Current Price is $30) was calculated at $6.01 per MMBTU ( Current $4.50 per MMBTU ).

Qatar had last offered $6.56 per MMBTU at Brent price of $40 per barrel while the current price is $5.35.
Compared with the natural gas import options, the government claimed the delivery price at border under the Iran-Pakistan gas pipeline was $5.70 per MMBTU at $40 Brent price and that of Turkmenistan-Afghanistan-Pakistan-India was $5.90.

http://www.dawn.com/news/1238783

Riaz Haq said...

World's Largest #LNG ship with 216,000 cubic meters from #Qatar docks at Port Qasim in #Karachi #Pakistan http://www.samaa.tv/economy/2016/03/largest-lng-ship-docked-at-port-qasim/ …

The first-ever ship of Liquified Natural Gas (LNG), after reaching an agreement between Pakistan and Qatar on LNG import last month, entered Pakistan’s maritime economic zone and was docked at Elengy Terminal at Port Qasim, Tuesday evening.

The Qatari ship is the largest vessel carrying LNG to Elengy Terminal and is one of the largest ships anchored at Port Qasim.

Its capacity is 216,000 cubic metres, said Elengy Terminal statement here.

After docking, the LNG ship was hooked up with FSRU Unit of Elengy Terminal for re-filling of gas process.

The ship would remain hooked up at the Elengy Terminal for two days till the process of re-gasification in pipeline is completed.

The next LNG ship from Qatar is scheduled to arrive at Port Qasim on March 8, 2016.

The Engro’s Elengy Terminal capacity has been enhanced to 400 mm CEFD, the statement said

Riaz Haq said...

#Iran envoy in #Delhi accuses #US, #India #LNG industry of blocking #Iran-#Pakistan-#India #gas pipeline project

http://www.newindianexpress.com/world/Iran-Pakistan-India-Gas-Pipeline-not-Possible-Iranian-Ambassador/2016/04/22/article3394553.ece …


Iranian ambassador Gholamreza Ansari also stressed that the "Americans will not let it happen".

"Those who have invested in the LNG (liquified petroleum gas) projects in India will not allow the pipeline venture to take off, he said at a media interaction at the Foreign Correspondnets' Club here Thursday evening..

"People who have invested in LNG in India, I don't think they will let any pipes to come in," he said.

"Americans are looking for the Indian market for the future and any sort of pipeline will put and end to these investments. So, I don't think pipeline can be a serious project. I am sure Americans will not let this project go ahead," he added.

He said that the Chabahar port project that will open up access to central Asia has been almost finalised.

"It has almost been finalised. Only the signatures at the ministerial level is due," he said.

Riaz Haq said...

#Pakistan Seals Major Deal for 75,000 tons of #LPG with #Iran | http://OilPrice.com http://oilprice.com/Latest-Energy-News/World-News/Pakistan-Seals-Major-LPG-Deal-with-Iran.html … #oilprice


By Charles Kennedy
Posted on Wed, 04 May 2016 18:26 | 0
Pakistan and Iran have signed a deal under which the former will import 75,000 tons of liquefied petroleum gas within a year, months after a similar agreement was inked with Qatar.

According to the deal, signed by the All Pakistan Liquefied Petroleum Gas Distributors Association and a national Iranian company, at least 6,000 tons of LPG will be imported from Iran every month over the course of a year.

In February, Pakistan and Qatar signed a $16-billion liquefied natural gas (LNG) deal which provides imports for 16 years, throwing the authorities in energy-crisis ridden Pakistan a life-line for supplies.

Related: A 4.5-Million-Barrel Per Day Oil Shortage Looms: Wood Mackenzie

The deal signed in Doha by Pakistani Prime Minister Nawaz Sharif and Emir of Qatar Sheikh Tamim bin Hamad bin Khalifa will see Qatar export 3.75 million tons of LNG to Pakistan. This is significant for Pakistan, which faces a 50% supply gap in relation to demand.

As concerns the deal with Iran, the price of the imported LPG will be in line with local market prices, according to All Pakistan Liquefied Petroleum Gas Distributors Association president Irfan Khokhar.
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In the meantime, Pakistan’s only LNG terminal at Port Qasim has converted 1.7 million tons of imported LNG and pumped more than 77 billion cubic feet of gas into the national gas distribution network. Over the course of last 13 months, some 29 LNG shipments from Qatar, Australia, Nigeria and Spain have docked at this port.

Related: The Last Great Frontier For Cheap Oil And Gas?

“This terminal alone will save up to $600 million for Pakistan through fuel substitution and will generate up to 2,000MW of electricity. The step to set up LNG import infrastructure is in the right direction and the country needs another three to four LNG import terminals to curtail the ongoing crisis,” Pakistani media quoted terminal manager Amir Mahmud as saying.

Riaz Haq said...

#Pakistan prepares its second #LNG import terminal http://reut.rs/2bL9MlS via @Reuters

http://www.reuters.com/article/pakistan-lng-idUSL3N1B41ST

Pakistan is taking another step towards becoming a key buyer of liquefied natural gas (LNG), signing a deal to purchase a Floating Storage and Regasification Unit (FSRU) for its second import terminal.

Singapore's BW Group said in a statement on Monday that it would deliver the FSRU to Pakistan GasPort Limited (PGPL) in the fourth quarter, as well as providing the terminal at Port Qasim, Karachi with LNG regasification services in a 15-year agreement.

The South Asian country has been earmarked as an up-and-coming demand outlet for the oversupplied LNG market. Along with Egypt and Jordan, Pakistan was a newcomer to the LNG import market in 2015, helping drive up demand and absorb growing world supplies from a wave of new projects.

The new import terminal will be able to receive 600 million cubic feet of natural gas per day and is expected to be commissioned for operations by mid-2017.

The terminal will reduce Pakistan's gas deficit by 30 percent and ensure fuel for 3,600 megawatts of new power generation plants being constructed in the country, said PGPL chairman Iqbal Ahmed.

Pakistan started up the 3.5 million tonnes per year Engro Elengy LNG terminal, the country's first LNG import facility, in Port Qasim last March. Pakistan shipped in a total of 1.02 million tonnes of LNG in 2015, and has imported 1.78 millions tonnes in the first seven months of this year.

"We are seeing weaknesses more in the North Asian market, and (South) Korea ... and a lot of the strong (demand) growth in where you might expect," said Neil Beveridge, a Hong Kong-based analyst at AB Bernstein, referring to emerging economies such as Pakistan.

Qatar, which signed two term supply contracts with Pakistan this year, is the country's largest LNG supplier.

Riaz Haq said...

Floating liquefied natural gas terminals are key to #Pakistan’s #energy plan. #LNG http://on.wsj.com/2cqS8rj via @WSJ

Pakistan is taking on its acute energy shortage by dramatically ramping up imports of liquefied natural gas, while undertaking the longer-term goal of upgrading its energy infrastructure with new pipelines, refineries and storage facilities.

Key to Pakistan’s plan are floating terminals that will convert imported LNG into gas.

Costing less than half of building a traditional on-land terminal and faster to get up and running, the vessels anchor at ports, often on a long-term basis, and pipe gas into land-based pipeline networks, helping cash-strapped countries meet urgent energy needs. The floating import terminals have opened up new markets for LNG producers, who are under pressure from falling prices that have halved in the past two years due to a wave of new supply.


The country kick-started LNG imports in 2015, with Pakistani petrochemical and energy company Engro Corp. Ltd. leasing a floating import terminal, stationed in Karachi’s Port Qasim from where gas is piped into Pakistan’s local distribution system. A second terminal is planned for mid-2017 by a consortium led by Pakistan GasPort Ltd. Up to five such terminals are needed, said Sheikh Imran ul Haque, chief executive of the country’s biggest energy importer, Pakistan State Oil.

“Pakistan has not seen as much restructuring in its energy sector as what’s happening today in decades. And if we’re successful, there’s a potential investment of around $15 billion in refineries, pipelines, and the other projects coming in,” Mr. Haque said.


Mr. Haque said that Pakistan will be in the market within the next four months to buy around 4 million tons per year of LNG to supply its second import terminal. The LNG will most likely be purchased in a series of tenders at between 0.75-and-1.5 million tons apiece, Mr. Haque added.

Pakistan officials see LNG imports as providing fast relief.

The country of nearly 200 million people has long suffered from a lack of investment in its energy sector, causing hours of rolling supply cuts to homes and businesses daily. The U.S. Agency for International Development estimates that power shortages curb Pakistan’s economic growth by around 2% a year.

Riaz Haq said...

Next #LNG importing giant #Pakistan readies for buying spree of 600 billion cubic feet per day | ET EnergyWorld

http://energy.economictimes.indiatimes.com/news/oil-and-gas/next-lng-importing-giant-pakistan-readies-for-buying-spree/55198906

Pakistan LNG Ltd has launched a mid- and a long-term tender to purchase a combined 240 shipments of liquefied natural gas (LNG), the company said on its website, as the country emerges to become a major gas importer.

Pakistan, which can only meet around two-thirds of its gas demand, is expected to issue further tenders seeking twice as much supply to fill out remaining capacity at its new import terminal at Port Qasim, in the commercial capital Karachi, according to one Pakistani energy expert.

The mid-term tender covers a period of five years and calls for 60 shipments, while the long-term tender is for 15 years and 180 cargoes, according to information presented in the tender documents released on the company's website on Tuesday.

Suppliers must submit bids by Dec. 20.

Pakistan has ploughed billions of dollars into LNG infrastructure, including the construction of a second LNG import terminal and pipelines linking Karachi with Lahore in the Punjab region, the nation's industrial heartland.

The current crop of tenders are a small part of Pakistan's projected demand as the country works to bring two more import terminals online within the next couple of years, making it a potent force in global gas markets.

The country first began buying LNG last year and has already contracted supplies from trading firm Gunvor and Qatargas, the world's biggest LNG producer.

Cheap gas is tempting out new importers from the Middle East to Africa and Asia, helping stave off a deeper price rout hurting producers' bottom lines.

Cheaper than fuel oil and cleaner-burning than coal, LNG suits emerging economies racing to bridge electricity shortfalls and support growth on tight budgets.

The Port Qasim LNG terminal, which is due to go online in mid-2017, has a capacity of 600,000 million cubic feet per day.

"This tender is for 200 million cubic feet. That means another 400 million will need to be tendered out soon," said the industry source.

A Pakistan LNG official in September said the country was working on commercial as well as government-to-government LNG deals.

Riaz Haq said...

#India should revive #Iran-#Pakistan-India gas pipeline: #Indian Parliamentary Panel http://www.financialexpress.com/india-news/india-should-revive-iran-pakistan-india-pipeline-parliamentary-panel/593913/#.WM6fx1OAQNI.twitter … via @FinancialXpress

India should consider reviving the long-delayed Iran-Pakistan-India (IPI) gas pipeline following easing of sanctions on Tehran, a Parliamentary panel has said. India had almost abandoned the IPI pipeline in 2008 following the US sanctions against Iran over its suspected nuclear programme and has instead pursued a rival line from Turkmenistan, passing through Afghanistan and Pakistan (TAPI pipeline).
“The government should examine the idea of reviving the (IPI) project as international conditions have become favourable following lifting of sanctions against Iran,” the Standing Committee on Petroleum and Natural Gas said in a report submitted to Parliament on Friday.
The Oil Ministry in its comments to the committee stated that IPI pipeline was envisaged to transport natural gas from South Pars gas field of Iran to Pakistan and India with a carrying capacity of 60 million standard cubic meters per day, to be equally split between India and Pakistan. “The total length of the pipeline up to Indian border (near Barmer) was about 2,135 km (1,100 kms within Iran and the rest within the territory of Pakistan),” the ministry said. “As per past estimates, investments required for this pipeline were in excess of $7 billion.”
There has been “little or no progress” in the IPI project since 2008 for a number of reasons, the Committee said in its report without elaborating.

India is pursuing transnational pipelines to meet rising energy needs. The country is reliant on imports to meet about half of its natural gas needs. The panel said a consortium for Turkmenistan-Afghanistan -Pakistan-India (TAPI) pipeline — TAPI Pipeline Company Ltd (TPCL) — was incorporated in Isle of Man, and shareholders’ agreement signed in December 2015.
Turkmenistan will own 85 per cent of TPCL while India, Pakistan and Afghanistan will each have 5 per cent stake. “The construction of pipeline has commenced in December 2015 and is likely to be completed in about 7 years,” it said.
It recommended that TAPI project be monitored closely in collaboration with other participating countries in order to ensure that the project is completed in time.
“The Committee feels that trans-national pipelines are important elements of national energy security and they need to be pursued vigorously,” the report added.
On April 7 last year the Investment Agreement (IA) of TPCL was signed in Ashgabat. “It relates to initial equity infusion by the shareholders. TPCL subsequently opened its office in Dubai, UAE and has been holding its board meetings,” the ministry said in its submission to the panel.

Riaz Haq said...

THE EXPRESS TRIBUNE > BUSINESS
Pakistan set to overcome energy crisis in six months: Abbasi

https://tribune.com.pk/story/1411718/pakistan-set-overcome-energy-crisis-six-months-abbasi/

Pakistan is poised to overcome the chronic energy crisis in the next six months as it doubles the import of liquid natural gas (LNG) and removes the deficit in power production, said Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi on Tuesday.

“The second LNG import terminal would become operational in two months,” Abbasi said at the rebranding of a Pakistan State Oil’s (PSO) outlet in Karachi.

The new import terminal, Pakistan LNG Terminal Limited at Port Qasim by Pakistan GasPort consortium, would add 600 million cubic feet per day (mmcfd).

Engro’s Elengy Terminal Pakistan Limited at Port Qasim has already been importing 600mmcfd in the country from Qatargas.

The minister said import of LNG would continue to increase to meet rising domestic demand going forward.

“The domestic demand has shot up to 7bcfd (billion cubic feet per day) against local production at 4bcfd,” he said.

“Local production has remained stagnant at 4bcfd for the last 15 years.”

He said that the country would do away with the deficit gas production by importing 3bcfd by December 2018.

A Turkish company, Global Energy Infrastructure Limited, is constructing another LNG import terminal with a capacity of 750mmcfd at Port Qasim. As per plans, the terminal would be ready to import gas sometime in July-December 2018, it was learnt.