Islamabad: Amid delay in a long-term deal for liquefied natural gas (LNG) supply between Pakistan and Qatar, Russian firm Gunvor and Royal Dutch Shell on Tuesday won relatively short-term gas supply contracts over a period of five years.
They got the contracts when financial bids offered in response to two tenders floated by Pakistan State Oil (PSO) were opened. Eight companies participated in the tenders.
Prices quoted by the Russian and Dutch companies were lower than the price agreed between the governments of Pakistan and Qatar for the long-term arrangement. Both companies will supply 120 LNG cargoes over the next five years.
“Gunvor will supply 60 cargoes at 13.37% of Brent crude price and Shell will also supply the same 60 cargoes at 13.80% of Brent crude price,” an official said.
“Recommendations for a formal award of the contract will be sent to the PSO board of directors for approval.”
This is the first time in decades that a Russian company has got engaged in energy business in Pakistan.
However, this has raised many eyebrows as Gunvor is constantly winning contracts for LNG supply. Earlier, Gunvor – a privately owned company – got a contract for bringing four LNG ships.
Nine trading firms including commodities giant Vitol, Glencore, Trafigura, Marubeni and US-based Excelerate Energy had submitted bids but all were rejected.
According to media reports, Gunvor was the world’s fourth biggest oil trader and its strategy has been to buy cheaper oil in Russia and sell in the international market to make profits.
The Economist reported on March 21, 2014 that the US Treasury claimed that Putin had investments in Gunvor, though the company denies the claim.
A senior PSO official also said they had no such information, adding Gunvor applied for the LNG contract by offering a bid and won the contract. “Pakistan needs gas to overcome the energy shortfall and LNG will help in this regard,” he said.
Owing to the plunge in crude oil prices, Shell is focusing on LNG business in the world market. During the previous government of Pakistan Peoples Party, Shell had tried to strike an LNG deal with Pakistan but failed due to a controversy over the Mashal LNG project, which landed in the Supreme Court.
Government Holdings Private Limited also floated on Tuesday a tender for setting up a second LNG terminal. The first terminal had already been set up at Port Qasim by Elengy Terminal Pakistan Limited.
Pakistan produces 4 billion cubic feet of natural gas per day (bcfd) against the demand for over 6 bcfd. The government considers LNG as a fast-track source to bridge the energy shortfall.
