Page 7 - AsianOil Week 09

AsianOil SOUTH ASIA AsianOil
following two years and 12.14% for the remain- ing 11 years, according to one of Bloomberg’s sources. Both deals cover one cargo per month, with the Gunvor deal running for five years until June 2022, and the contract with Eni covering the period up to 2032.
Renegotiation push
Pakistan LNG is not the only one to push for bet- ter terms as older LNG supply contracts become increasingly unfavourable in the face of current spot prices. Indeed, those seeking better terms include neighbouring India.
In 2015, India’s Petronet LNG reworked the pricing formula in its 25-year contract with Qatar’s RasGas, resulting in prices being roughly halved in return for India stepping up LNG pur- chases from the Middle Eastern country. India subsequently renegotiated contracts for pur- chases of LNG from both Australian and Russian exporters.
More recently, India tried once again to persuade Qatar to renegotiate the terms of the long-term supply agreement between the two countries, with the request aimed at moving away from oil-linked prices. The efforts failed this time, however, with Qatari officials saying the country – one of the world’s leading LNG exporters – was not open to renegotiating exist- ing contracts. Indeed, Qatar is also reported to have refused to enter similar renegotiations for the 15-year supply deal it has with Pakistan.
Separately, Japan’s Osaka Gas entered into arbitration last year with the marketing unit of ExxonMobil’s PNG LNG project following a dispute during a price review. Other Japanese buyers, including Tokyo Gas and JERA, have sought to renegotiate contracts in order to allow for greater flexibility – for instance by scrapping destination clauses – rather than for reasons related to pricing. However, the longer spot prices remain low, the less economical it will be for buyers to stay locked into older contracts.
Many long-term contracts are also coming up for renewal in the next few years, and it would not be surprising if buyers opted to bring more short-term contracts and spot market purchases into their supply mix. The abundance of LNG on the global market means that it is easier than ever to pursue flexibility of supply.
For Pakistan, obtaining more favourable pricing would be a major win, especially as the country is seen as one of the biggest growth markets for LNG. BloombergNEF has projected that Pakistani LNG imports could rise by 80% between 2019 and 2023.
The push for more LNG in the Asian coun- try seems to be gaining momentum, with local media reporting this week that Pakistan’s gov- ernment is considering deregulating the LNG industry and allowing private players to import the fuel. And with cheap LNG so readily avail- able on the spot market, this is a good time to make such a move.™
Week 09 04•March•2020 w w w . N E W S B A S E . c o m P7