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4-Traders Homepage  >  Equities  >  KARACHI STOCK EXCHANGE (GUARANTEE) LIMITED, THE  >  Pakistan State Oil Company Limited    PSO   PK0022501016

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Pakistan State Oil : PSO SET TO DELIVER QATAR LNG

02/08/2016 | 10:17am US/Eastern

Lastly, the Government of Pakistan permitted Pakistan State Oil (PSO) to ink LSPA (LNG sale purchase agreement) with Qatargas for import of LNG (liquefied natural gas) of almost $16 billion in 15 years at a comparatively lower rate. The Economic Coordination Committee (ECC) had been dragging feet to accept the LSPA with Qatar due to difference of opinion over its legalities and higher rates offered through Qatar.

The committee gave a go-ahead when it was informed that Qatargas had accepted to decline LNG price to 13.37 percent of Brent to match a bid received from Russian firm Gunvor for 5-year.

PSO and the Ministry of Petroleum had previously agreed an LNG rate of 13.9 percent of Brent, which was considered on the larger side through majority of the power sector adepts. PSO also inked a deal with Gunvor in Karachi for 5-year at 13.37 percent of Brent.

Some serious liabilities of Qatargas will, however, now rest with the domestic firms and clients.

It is said that the Petroleum Ministry had requested the Government of Pakistan to ink the deal on the basis of take or pay liability on Pakistan and 20 percent liability on LNG supplier for its failure or off-specification supplies.

Also, the ministry urged that under the original SPA (sales and purchase agreement), the Qatar Liquefied Gas Company Ltd 3 (QG3) was to pay port charges at a minimum of $320,000. These charges were accepted through OGRA (Oil and Gas Regulatory Authority) in its RLNG (regasified-LNG) rate early last month at $8.64 per mmBtu. However, the Qatar authorities now wanted LNG supplies by Qatar Liquefied Gas Company 2 (QG2) whose port charges will be on the larger side.

PSO and the Ministry of Petroleum requested the ECC to direct the regulator to permit port charges beyond $320,000 to become part of RLNG. Furthermore, the SPA is a take or pay contract and as such PSO would be liable to pay for all the quantities as per the agreement although some mitigating provisions were also part of the contract.

Conversely, the seller liabilities under the agreement are capped at 20 percent in case of non-delivery of LNG or where off-specification LNG is delivered and is approved through PSO, subject to the fact that the costs are sensible and incurred through PSO or billed by the gas firms. In case off-spec LNG is delivered where neither PSO nor seller was aware that LNG was outside specification, then subject to the conditions the cap on liabilities is 25 percent for the seller. Moreover, port charges in excess of $320,000 would be paid through PSO and would form part of price of RLNG or swapped gas as determined through OGRA and notified by PSO. Port charges for QG2 are predicted at about $700,000.

The ministry had also proposed that PSO should be excused from any contract under which they have to obtain the LNG re-gasified and that they shall have no blame for blending or dilution even though it is required under the LNG Policy 2011. On top of that, an executive order has been demanded to be issued to nullify existing laws by clarifying that sale of LNG/RLNG through PSO (as LNG buyer) to the gas firms or third parties is not inconsistent with the LNG policy.

Furthermore, the ECC was also requested to declare that since SSGCL had already entered into a LNG services agreement for receiving, storage and regasification of LNG with Engro Elengy Terminal, PSO should not be required to enter into such contract or arrangement.

Accordingly, PSO may be permitted to sell the LNG/RLNG to the gas utility firms or third party clients. The ministry has also sought endorsement of the ECC to permit PSO as buyer to execute the sale and purchase agreement along with side letter with QG2 (instead of QG3) as seller pursuant to government-to-government contract and also to accept MSPA (Master Sales and Purchase Agreement) on FOB (Freight On Board) or DES (Delivery Ex-Ship) with Qatargas Operating Company Ltd.

Under the contract, QG2 is predicted to supply a minimum of 1.5 million tons of LNG per annum (MPTA) in the first 2-year (2016-17), which would rise to 3 million tons for 3rd year onward (2018-30). In the first year, a minimum of 200 mmcfd RLNG would be inducted into gas system, which would rise to 400 mmcfd in the 2nd year.

FINANCIAL PERFORMANCE

During the period July to September 2015, the PSO sustained its market leadership with overall market share of 56.9 percent, whereas its share in black oil and white oil reached at 71.1 percent and 47.2 percent respectively. Furthermore, the mogas sales volume rose by 36 percent over the corresponding period last year chiefly because of the fall in the rate of mogas.

A growth of 3.4 percent was observed in JP-1, whereas a fall of 7.4 percent and 17 percent was recorded in HSD and FO respectively over the corresponding period last year.

The company recorded profit after tax of Rs3.3 billion during the period July-September 2015. a fall of 38 percent in pat over the corresponding period last year was observed which largely because of the reduction in value of inventory and black oil margins owing to reduction of 27 percent in the OPEC basket prices of crude oil.

However declining reducing in operating and finance cost by 24 percent and 29 percent respectively enhanced the profitability of the company.

© Pakistan Press International, source Asianet-Pakistan

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