Prime Minister Imran Khan witnesses the signing of the memorandum of understanding (MoU) on LNG between Pakistan and Qatar on Friday. Image Credit: Photo courtesy of PID

Islamabad: Pakistan entered into a new ten-year liquefied natural gas (LNG) agreement with Qatar at a significantly lower rate than the previous deal.

“The new contract will help save the country $300 million annually or nearly $3 billion in the next 10 years,” announced Prime Minister Imran Khan who witnessed the signing ceremony in Islamabad.

The new agreement has been signed at around 31 per cent lower rate than the 2015 contract by the previous PML-N agreement, special assistant to prime minister (SAPM) on Petroleum Nadeem Babar said.

10 years

“It is the lowest publicly disclosed [LNG] contract in the world today”, he stated. Under the new contract, Pakistan would pay around $316million less compared to prior agreement saving around $3 billion in LNG import during the next 10 years.

The fresh long-term contract has been signed at a rate of 10.2 per cent of Brent for import of 200 million cubic feet a day (mmcfd) LNG as opposed to the previous deal for 500mmcfd in 2015 at a rate 13.37 per cent of Brent.

Pakistan will get 3 million tonnes of LNG per year from Qatar Petroleum under the deal from January 2022 starting with average of two ships per month, which would be increased to four vessels in next three years.

The new LNG contract has a price renegotiation option after four years rather than 10 years that had been fixed in the earlier signed 15-year contract.

Detailing the new changes, Babar said that the letters of credit (LCs) had been reduced to $84 million as compared to the previous $170 million. The deal was finalized after a year-long negotiations between the leaders of Pakistan and Qatar.

Expensive contracts

The PM’s aide said the new deal would ensure price affordability along with stable gas supply nd economic stability. The fresh supplies would replace the existing expensive contracts with the Gunvor company that expired in December and another contract that will expire in next 14 months.

Federal Minister for Energy Omar Ayub Khan and Qatar’s Energy Minister Saad Sherida al-Kaabi inked the agreement between Qatar Petroleum and Pakistan State Oil Company Limited (PSO) on Friday. Qatari minister hoped that the deal would open new venues of collaboration between both countries.

“This agreement further extends Qatar’s long standing LNG supply relationship with Pakistan” and continue Qatar’s contributions towards “meeting Pakistan’s increasing energy demand” Saad Al-Kaabi said. “With a well-established gas market and distribution system, Pakistan is a strategically important market for Qatar LNG”.

Pakistan currently has two operational LNG receiving terminals, Engro LNG and Pakistan GasPort.