Pakistan LNG Story Presented by: Sheikh Imran ul Haque Managing Director and CEO Pakistan State Oil Company Limited
Effective LNG Import Structure by MPNR PSO LNG Importer Receiving LNG at terminal Transmission of regasified LNG SSGC (RLNG) to SNGPL through swap SNGPL Supply RLNG to end consumers
And Why PSO ? GOP assigned the role of importing LNG to PSO owing to its: • Financial strength PSO imports around 200 vessels of POL products annually, amounting to USD 6 bn (USD 8 bn in 2014) with margins supporting trading business risks: Description PMG HSD OMC Margin 2.35 2.35 Equivalent in USD/MMBTU 0.69 0.62 As %age of cost 5.5% 5.4% • International Credibility With oil suppliers which would grandfather with LNG Suppliers (ENI, BP, Petrochina, Trafigura, Gunvor, Glencore, Shell, GNF) • Expertise in Financial Management, Skills in Energy Supply Chain Despite severe constraints, has managed its debt and kept the wheels of industry operating
LNG Journey Starts • Three procurement streams were utilized for import of LNG to Pakistan: • Direct negotiations under Government to Government arrangement; • Spot purchases; • Term procurement for a period of time • Meetings were held with: • Petronas, Malaysia’s designated entity and • PB Trading Sendirian Berhad, Brunei Darussalam’s designated entity, • Qatar which has liquefaction facilities to produce 77 Mtpa of LNG with all 14 LNG trains running at full capacity which confirms Qatar as the world’s main LNG supplier with a market share of over 30%. • PSO and GOP’s international consultants were engaged to develop contracts and provide market intelligence
G to G • ECC vide decision dated 2nd July 2013 authorized Ministry to engage in negotiations with Qatargas on Government to Government basis for importing LNG on delivered Ex-ship basis. • Pakistan State Oil Company Limited (PSOCL) and Qatargas Operating Company Limited (QOCL) were nominated by respective governments to negotiate the LNG Sales Purchase Agreement (LNG SPA). • Resimulations undertaken in Spain and meeting of Port Qasim, Engro & PSO held in November, 2015 in Doha, Qatar. Qflex can deliver LNG. Port Charges (USD 660,000 – 809,000) capped Port at USD 320,000 • The pricing and principal commercial terms of the LNG were reviewed and finalized by the Price Negotiation Committee constituted by the GOP. The negotiations have taken time to complete and agreed at 13.9% of Brent
PSO – Qatargas Long term SPA Highlights Tenure 2016 to December 31,2031 Extendable with mutual consent Terms Take or Pay Type Delivered Ex-ship Volumes 2016 (prorate of 2.25 mtpa) 2017 (3.75mtpa) Buyer Pakistan State Oil Company Limited Seller Qatar Liquefied Gas Company Limited 2 Price revision After 10 years Price negotiated by Price Negotiating Committee setup by GOP/ECC PSO and GOP’s international consultants have been engaged Support in negotiations with Qatargas , the State of Qatar’s designated entity, on the terms of a long term LNG Sale and Purchase Agreement ( LNG SPA ) for 15 years, on Government to Government basis.
Current LNG Import and way forward Government to Government Deal with Presented to ECC 2 months ago Qatargas
The LNG Journey Continues PSO has issed Spot / Multi cargo tenders Spot/Multi-Cargo since May 2015 and first cargo received Tender in July 2015.
The Long Term, Spot & Short Term Market Afforded and Opportunity Japan`s long term contracts Mild 2013-2014 winter, South extended at roughly half of the Korea retreats from Spot Market Nuclear Shutdown volumes in Japan Long Term 16% 17.80% 18.90% 25.40% 25.10% 29% 33% 2008 2009 2010 2011 2012 2013 2014 A number of key factors have contributed to the rapid growth of non long-term trade in recent years including The growth in LNG contracts with destination flexibility, mainly from the Atlantic Basin and Qatar, which has • facilitated diversions to higher priced markets. The increase in the number of exporters and importers. 26 exporters & 28 importers in 2014 as compared to • 6 exporters and 8 importers in 2000. • Reliance of Japan, South Korea & Taiwan on spot market for sudden changes in demand (Fukushima) due to lack of domestic production or pipeline imports. The large growth in the LNG fleet, which has allowed the industry to sustain the long-haul parts of the spot • market (chiefly the trade from the Atlantic to the Pacific).
Over USD 400m Procurement Has Ensured Supply Chain Cargo Berthing at Quantity Quantity Quantity FOB/DES PQA [m3] [M Tonnes] [MMBTU] $ / MMBTU 1 26-Mar-15 145,545 65,297 3,419,330.00 8.6527 2 24-Apr-15 144,219 63,354 3,294,832.00 7.8900 3 11-May-15 143,959 63,310 3,293,143.00 7.8800 4 28-May-15 143,959 63,246 3,290,990.00 7.9000 5 15-Jun-15 147,653 63,404 3,297,446.00 7.8800 6 9-Jul-15 136,994 60,188 3,133,192.00 8.0900 7 17-Jul-15 125,010 56,146 2,904,160.00 8.2321 8 28-Jul-15 131,455 58,779 3,041,320.00 8.5754 9 28-Aug-15 134,713 60,738 3,139,390.00 7.6142 10 10-Sep-15 142,001 64,170 3,305,580.00 8.7758 11 20-Sep-15 131,385 57,604 2,999,340.00 6.6757 12 6-Oct-15 142,951 60,345 3,155,050.00 7.6208 13 16-Oct-15 138,658 58,415 3,057,050.00 8.1275 14 27-Oct-15 130,058 57,008 2,966,850.00 6.0988 15 15-Nov-15 143,013 60,138 3,147,590.00 7.8132 7.5057 16 05-Dec-15 139,180 62,625 3,241,970.00 17 16-Dec-15 140,597 61,677 3,210,010.00 7.4622 Total 2,361,350 1,036,446 53,897,243.00 7.8114
The End Journey Two term tenders issued to cover the Term Tender deficit with Qgas and bring in increased volumes required
LNG Players Participated in PSO’s Tenders 1. GUNVOR 7. ENI SPA 2. BP SINGAPORE 8. EDF 3. TRAFIGURA 9. GLENCORE 4. PETRO CHINA 10. MARUBENI 5. SHELL 11. VITOL 6. GAS NATURAL 12. EXCELERATE
But …..Supply Chain Needed to be Maintained Government to Government Deal with Deal in ECC approval process Qatargas PSO had to issue Spot / Multi cargo Spot/Multi-Cargo tenders for 1Q2016 Tender Two term tenders issued to cover the Term Tender deficit with QGas already underway
Supply Chain Being Maintained Remarks Cargo Berthing Schedule % of Process at PQA Brent 17-19 Jan -16 1 17.9034 Spot Tender - 15 awarded 9-11 Feb -16 2 18.9349 Spot Tender - 15 awarded 23-25 Feb -16 3 18.0850 Spot Tender - 15 awarded 9-11 Mar -16 4 13.3700 Term Tender -13 awarded Scenario 1. Based on Q Gas response and ECC approval 1/2 cargoes in Jan and Feb from Q Gas 2/3 cargoes per month from QGas starting March 1 cargo per month from Gunvor starting March 2 In case of no approval Term Tender for 2 additional cargoes per month starting March 1 cargo per month from Gunvor starting March 1 cargo per month from Shell starting March
Imported Gas Price at Brent of USD 50 per barrel Offers in the Past Gas Quantity Total Price Bscfd Investment mmbtu US$ 5 year contract 13.37% of Brent $6.69 Qgas current offer 13.9% of Brent $6.95 0.60 0.13b Scrapped tender 83.5% or 14.4% of Brent $7.20 0.50 Qgas earlier Offer 89.9% or 14.9% of Brent $7.45 0.50 0.20b Maashal offer 91.0% or 15.2% of Brent $7.60 0.50
Current Status Government to Government Deal with Under ECC approval process and Qgas Qatargas Visited PSO has issed Spot / Multi cargo tenders Spot/Multi-Cargo since May 2015 and first cargo received Tender in July 2015. 1) Term Tender # 13 has been awarded Term Tender to Gunvor 2) Shell is the lowest bidder in Term Tender # 14 and bid valid till 15-01-2016
Challenges • Low Margins • Infrastructure • Circular Debt • Volumes for 2 nd Terminal
RLNG Pricing Guidelines As per ECC Decision dated June 6, 2015, RLNG pricing components for PSO include: i. LNG DES/ FoB price (including freight) ii. Other import related actual costs iii. PSO margin upto 4 percent of LNG DES Price, subject to review after 3 months by an Inter-Ministerial Committee - 18 -
RLNG Price Cost Components Provisional RLNG Price per OGRA Delivered Ex-Ship Price (DES price) Actual PSO Margin Restricted to 1.82% of DES Insurance Premium Actual Wharfage Actual Load Port Surveyor Charges Actual Discharge Port Surveyor Charges Actual Stamp Duty Actual Infrastructure Cess Disallowed Exchange Loss/Gain Actual Excise Duty Actual Terminal Charges Fixed at $ 0.66/MMBTU SSGC & SNGPL Cost of Service Disallowed SSGC & SNGPL Admin Margin Disallowed Retainage Restricted to 0.75% of total LNG cost Transmission Losses 0.5% of DES price • Note the DES price of September 2015 has been fixed by OGRA for all cargoes that fall in the preceding period- March to September 2015
OGRA Price Determination Subsequent to the ECC Decision, OGRA issued its Provisional Price Determination on October 7, 2015 wherein: PSO’s margin was reduced from 4.0% to 1.82% (Est. Loss to PSO: Rs. 750 mn) * Infrastructure Cess paid by PSO to Sindh Government was disallowed (Est. Loss to PSO: Rs. 342 mn)* Lower Sep 2015 price made applicable to all previous cargoes from April to August 2015 (Est. Loss to PSO Rs. 749 mn)* PSO filed a petition for review of the above determination on December 7, 2015 First session of Public Hearing conducted by OGRA in Karachi on December 28, 2015. Next session held in Lahore on January 4, 2016 * Note: Amounts are based on cargoes imported till December 2015 - 20 -
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