P.M. Imran Khan witnesses the signing of LNG MoU between Pakistan and Qatar. Courtesy PID
Government claims new, cheaper deal will help replace expiring old, expensive deals
The Government of Pakistan on Friday announced it had inked a new long-term Liquefied Natural Gas (LNG) supply contract with Qatar, stressing that the additional 200 million cubic feet a day (MMCFD) was being secured for around 31 percent less than the 2015 contract for 500MMCFD.
Claiming that the 10-year-agreement marked the “lowest-ever publicly disclosed price under a long-term contract in the world,” Special Assistant to the P.M. on Petroleum Nadeem Babar acknowledged that it was achieved through the joint efforts of both the political and military leaderships of Pakistan. He told a press conference that the new deal was required to replace two earlier deals that were expiring shortly.
The signing of the deal raised some eyebrows as the incumbent Pakistan Tehreek-e-Insaf government has repeatedly accused the previous Pakistan Muslim League (Nawaz) government of “trapping” the country through its previous contracts with Qatar. At the time, the PMLN had also claimed that it had secured the lowest long-term price for LNG supplies.
Under the new agreement, which goes into effect from January 2022, Qatar would initially deliver two ships with around 200MMCFD of LNG a month. If needed, said Babar, the supplies would be enhanced to four ships at the rate of 10.2pc of Brent. Comparing to the deal signed by the PMLN, he said that it had been for 15 years, beginning with 100MMCFD per month before being expanded to 500MMCFD at the rate of 13.37pc of Brent.
The new deal also has the option to renegotiate the price after four years, as compared to the 10 years required by the old deal.
Based on the volume of the new contract, said Babar, Islamabad would pay around $316 million lower under the new deal when factoring in equal volumes. “In 10 years, this works out to be $3 billion,” he said. “Pakistan is providing $170 million letter of credit under the past contract compared to $84 million under the new contract,” he said.
Earlier, addressing the groundbreaking ceremony of the Central Business District in Lahore, Prime Minister Imran Khan said the deal had been finalized after over a year of negotiations. Reiterating that the country would save $300 million annually because of it, he claimed it would also ensure cheaper energy.