ISLAMABAD The GDF Suez of France won on Tuesday a contract for the import of 3.75 million tons per annum of liquefied natural gas (LNG) for up to 20 years, but efforts continued to allow its competitor Shell to import an additional 2.5 million tons for the same period.
The price of LNG to be imported from Qatar by the GDF Suez in the first six years will be $1.8 billon lower than the rates offered by Shell.
According to sources, the import price will be around $9.3 per MMBtu if calculated at a crude price of $70 a barrel.
The decision was announced after a meeting of the Economic Coordination Committee (ECC) of the cabinet presided over by Finance Minister Shaukat Tarin.
The committee also made presentation of national identity cards mandatory for getting a pack of 2kgs of sugar from utility stores at subsidised rates.
It approved the revival of a 10.5MW gas-based power project in Punjab that had been shelved in 1998 and allocated about 16MMcfd (million cubic feet per day) of natural gas from the Sui Northern system to the Pak-Arab Fertiliser from 2012 to 2019.
According to a handout, the ECC discussed the Mashal LNG project and decided to allow LNG import of 2.75 million tons per annum by the GDF Suez for a medium-term period of six years at a rate of 3.95 per cent Brent plus 75 per cent maximum of Henry Hub-National Balancing Point formula plus $1.58 per MMBtu.
It also approved import of another 1.5 million tons per annum of LNG by the GDF Suez for long-term supplies at 15.2 per cent of Brent plus $0.5 per MMBtu for a period of 20 years subject to further price improvement through a final round of negotiations with the GDF. The long-term price will be for 10 years and renegotiable for the second 10-year term.
Informed sources said that Shell continued to contest the decision even after the meeting, although the price offered by it was higher. The company's representatives held meetings with Petroleum Minister Syed Naveed Qamar and senior officials of the finance ministry after the ECC meeting but before the decisions were conveyed to the media.
As a result, the initial statement about the ECC decisions officially released by finance ministry said “The ECC also decided that Shell's offer at 15 per cent Brent plus $0.5 per MMBtu, subject to further improvement in the final round of negotiations will be accepted for up to one MTPA medium-term supplies of six years and 2.5 MTPA from the seventh to 20th year.”
The sources said that when the finance minister came to know that the announcement of the ECC decisions had been manipulated to allow acceptance of Shell's offer, he ordered Finance Secretary Salman Siddique to issue a revised statement after deleting the controversial paragraph.
The revised statement did not say anything about the Shell offer.
The finance minister, petroleum minister and finance secretary were not available for comments.
The sources said that although an LNG pricing mechanism was yet to develop in the international market, the prices offered by the two companies were much higher than those at which India was importing LNG from Qatar.
The official statement said the ECC also approved a $500 million sovereign guarantee by the finance ministry to cover LNG supplies.
It approved award of a letter of acceptance to the 4Gas for setting up a floating storage and re-gasification unit in the first phase at a maximum indicative tariff of $0.5 per MMBtu, in accordance with the term-sheet agreed by the price negotiation commission and subject to conclusion of the internal rate of return.
The committee decided to consider conversion of the floating unit into a conventional land-based re-gasification terminal later and to initiate the process for putting up a second LNG terminal.
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