Italian, Chinese majors vie in Pakistan's mega LNG tender

Italian oil major Eni, China’s overseas energy unit PetroChina and two trading houses are vying to supply liquefied natural gas (LNG) to Pakistan in one of the largest tenders ever worth billions of dollars, sources said.

The 240-cargo 10-year tender, which is likely to be worth from $5 billion to $6 billion according to Reuters calculations and the estimates of another source based on current market conditions, was issued last month and closed on Thursday.

Pakistan is expected to be a significant growth driver in global LNG demand, with Wood Mackenzie estimating the country will need 25 million tons a year as domestic supplies dwindle and its economy grows. That would make it a top-five LNG buyer.

Eni and PetroChina’s Singapore unit were joined by the trading arm of Azeri state oil company SOCAR and commodities trader Trafigura in placing offers, the sources said.

Pakistan LNG, the state-owned company that issued the tender, declined to name any bidders.

“The technical bids for our long-term LNG supply tender were received and opened yesterday. Evaluations are underway,” it said.

SOCAR Trading SA confirmed it had bid. Trafigura said it does not comment on tenders. A spokesperson noted Trafigura was a stakeholder in the terminal due to receive the tendered LNG

“Trafigura owns 150 (million cubic feet a day) of LNG import capacity in that facility, which is key to its plan to supply LNG and gas to Pakistan’s private sector,” the spokesperson said.

PetroChina and Eni did not respond to requests for comment.

The tender is keenly watched due to its size and because Pakistan, gripped in an anti-corruption drive under the government of Prime Minister Imran Khan, is expected to publish the lowest prices offered by the companies.

This will give valuable insight into the opaque LNG market, which is characterized by closed bilateral trades, secret long-term supply agreements and an over-the-counter spot market.

Commercial offers are expected to be opened on Aug. 2, one of the sources said, when Pakistan LNG is likely to reveal bids.

The largest tender in recent years was issued by Egypt in October 2016 for 96 cargoes, but that was for a two-year period between 2017 and 2018 after the country suffered an acute gas shortage.

PRICED TO BRENT

Pakistan, like most Asian buyers, purchases LNG priced against Brent crude oil expressed as a price slope, or percentage of the oil contract.

In the last short-term tender, Pakistan said the lowest offers came in at 7.13% and 8.54% of Brent, or around $4.4 to $5.3 per million British thermal units at the prices of that day on June 14.

But multi-year contracts in the past year have tended to use a higher price slope - around 11 to 12%. That would place the price tag for the 240 cargoes - over 15 million tons in total - at between $5 billion and $6 billion.

Pakistan LNG issued the tender in early June to import 240 LNG cargoes of 140,000 cubic meters each for delivery over a 10-year period for the country’s second LNG terminal.

The cargoes will be sent into the Pakistan GasPort Consortium Ltd terminal, with first delivery expected between September 2019 and March 2020.

Both counterparties will also have the option for a price review after five years from the start of the contract, according to the bid documents.

The country’s biggest supplier currently is Qatar, with which it signed a deal in 2016 for 3.75 million tons of LNG a year for 15 years. It also has a five-year import deal with commodity trader Gunvor [GGL.UL] and a 15-year agreement with Eni.

Reporting by Sabina Zawadzki in LONDON and Jessica Jaganathan in SINGAPORE; editing by Richard Pullin, Veronica Brown and Dale Hudson

• Most Read
• Most Commented