ISLAMABAD: Global commodity trader Gunvor and Italian energy company Eni on Thursday emerged as the lowest bidders for supplying a total of 240 shipments of liquefied natural gas (LNG) at much lower rates than a similar government-to-government deal with Qatar.
An apple-to-apple comparison of 15 years shows that the price of LNG import from Qatar at current oil prices would be about $2.5 billion costlier than the latest bid results.
According to final bid results, Gunvor has quoted the LNG price at 11.62 per cent of a barrel of crude oil (Brent) for short-term supply for five years. This will be Gunvor’s second five-year contract after the one it signed early last year. Eni came up with a bid price of 12.29pc of crude oil price for long-term 15-year contract.
The latest bid price would provide savings of about $2.5bn
The bids, opened on Thursday, were invited by Pakistan LNG Company. Petroleum Minister Shahid Khaqan Abbasi confirmed the bidding results saying Gunvor with 11.62pc of crude for five years and ENI with 12.29pc of crude for 15 year were the lowest.
However, he said the independent consultant was finalising and evaluating bid results that would be posted on the website of the Public Procurement Regulatory Authority (PPRA) for 10 days before formal contract signing as required under the law.
About a year ago, Pakistan State Oil (PSO) secured an LNG deal with Qatar at 13.37pc of crude oil for long-term LNG supply contract for 15 years. This price with Qatar was finalised when Gunvor at the time came up under a short-term tender for five years with the same price, otherwise Qatar’s negotiated price was on the much higher side.
An official who followed the bidding process said the fresh price offered by Gunvor for the next five years would work out at $5.81 per million British thermal units (mmBtu) against previous price of $6.68 per mmBtu. Therefore, the fresh supplies would be cheaper, having a cumulative five-year impact of $600m.
Likewise, the new price for the next 15 years at 12.29pc of crude would work out at $6.1 per mmBtu at assumed crude price of $50 per barrel against the Qatari price of $6.68 per mmBtu at the rate of 13.37pc of crude. This would mean that the fresh bid works out at about $1.8bn over the 15-year contract life.
Mr Abbasi who appeared happy with the price decline said there were a number of flexibilities in the ongoing deal with Qatar and many aspects had price build ups. Under the Qatar deal, we can cancel shipments without penalties that was not possible in fresh bids.
An official said the first shipment under the fresh bids was now expected to reach Karachi by July this year. Both the successful bidders would be required to ensure one shipment each every month. As such, Gunvor would ensure 60 ships in five years and Eni would provide 180 ships in 15 years.
Under the previous arrangement, PSO is currently importing about 400m cubic feet per day of LNG. Gonvor won the first contract of LNG supply in May last year against a tender by PSO seeking supply of 100 million cubic feet per day (mmcfd) of LNG.
Another official said Pakistan would be saving $500m every year under short-term deal with Gunvor due to low prices while Eni’s price of LNG was also lowest compared to the gas price finalised with Qatar in long-term deal.
An official close to the petroleum minister said the bid prices were on the lower side because no other client had floated LNG tenders around the world at the moment except for Egypt that floated three tenders and materialised only one tender.
The official said Pakistan was expecting bids from US firms but none came forward because of uncertain LNG supplies from the United States. Pakistan was also expecting some Japanese firms to participate directly in the bidding but had participated with joint venture of one other company.
Some of the leading firms like Shell, Russia’s Gazprom, Malaysia’s Petronas and GDF of France also took part in the bidding. France and Italy had already approached Pakistan to sign LNG import deals on a government-to-government basis.
Pakistan LNG Company had floated two tenders for supply of LNG. One tender was for short-term LNG supply for five years period while the other was for 15 years. Around 15 companies had participated in short-term LNG imports whereas five companies participated in long-term contract.