(Bloomberg): Pakistan said it saved more than $600 million over the first 10 years of a natural gas supply deal by pitting some of the world’s biggest sellers against each other.
A report from the state’s oil marketing company presented two weeks ago to a senate committee, and reviewed by Bloomberg News, details how the 2016 deal came together with Qatar, the world’s largest supplier of liquefied natural gas. It also sheds a rare light on such high-stakes energy deals, which are almost exclusively settled behind closed doors and stay hidden from public scrutiny.
The maneuvering by Pakistan came after two years of negotiations hit an impasse as Qatar refused to lower its offer price for LNG. So Pakistan sought leverage on the open market in late 2015, publicly seeking 120 cargoes in two large tenders, which brought in bids from suppliers including Royal Dutch Shell Plc and BP Plc.
While negotiations with Qatargas Operating Co. were under way, the tender was “issued to fetch maximum number of bidders and best price option,” the presentation said. “The strategy helped bring down prices with Qatargas and saved $610 million.”
Timeline of a Deal
Pakistan and Qatar’s LNG negotiations
Pakistan then informed Qatar about the lowest bid, from Switzerland-based Gunvor Group Ltd., which the Middle East supplier agreed to match. Pakistan still purchased some LNG from Gunvor, awarding it the first tender. But the volumes it sought from the second tender ended up in the final Qatar deal, bulking it up by 25 percent.
The head of a senate committee now scrutinizing the deal, Mohsin Aziz, confirmed the details of the presentation in an interview last week. Pakistan State Oil Co. and Qatargas officials didn’t respond to requests for comment. Gunvor and BP declined to comment. Shell said it looks forward to future LNG options in Pakistan, without directly commenting on the tender.
The deal with Qatar, which was eventually settled for 3.75 million metric tons annually over 15 years, marked Pakistan’s emergence as an LNG buyer. The country turned to imports after its own declining production forced some factories to shut and caused blackouts. Imports have grown rapidly since early 2016, with Pakistan the seventh-largest LNG buyer globally in August, according to Bloomberg vessel-tracking data.