“Socar’s proposal was substantially higher than recent LNG agreement with Qatar Petroleum and spot LNG cargoes purchased through tenders,” the petroleum division said in a statement.
Pakistan’s ambassador in Baku Bilal Hayee had last week written back-to-back letters to the government saying the Chief Operating Officer of Socar had contacted him and expressed frustration on the prolonged silence and lack of response from the petroleum division over its offer of two separate credit lines of $120m for LNG and $100m for petroleum products for 60 days.
While the petroleum division did not talk about credit line for oil products, it said there were at least three major areas due to which the bilateral arrangement on LNG could not materialise. First, it said, the Socar’s offer for February to August 2021, LNG vessels were $7.2 million per cargo or $51 million for seven cargoes against spot tenders for the period.
Likewise, it said Socar’s offer was also higher by $15 million per cargo or $105million for seven consignment when compared to Qatar Petroleum’s contract price.
It said the Socar’s local representative had been told multiple times that Socar’s price under G2G was on the higher side and the company was requested to submit a proposal on fixed dollar terms or linked to Brent prices instead of Japan-Korea Marker (JKM) price formula as it was “extremely volatile”.
Secondly, the Socar’s 60-day credit line had “minimal financial impact” on price of LNG, but had a commercial impact on the price to the tune of $260,000 for one cargo. Per unit upward difference in price offered by Socar and price received by Pakistan LNG Limited (PLL) in tenders is 2 to 2.4 $/MMBtu. “Therefore, the impact of credit line offered (0.08$/MMBtu) does not justify expensive price quoted by Socar,” the petroleum division said.
Thirdly, there were also some other challenges with Socar which had not reimbursed $900,000 to PLL on account of excess payment of port charges whereas seven other LNG suppliers have reimbursed $12.7 million. Also, Socar was awarded a cargo on January 7 pursuant to competitive bidding for delivery on February 15 and 16.
However, Socar at first refused to provide cargo (which Socar provided after intervention at the highest diplomatic level) while at the same time pushed PLL to enter into a G2G arrangement for purchase of strip of cargoes (11 – 12 cargoes during February to December this year) with price based on JKM premium.
“Socar wanted to take advantage of PLL’s LNG requirement for February 2021 and tried to sell expensive cargoes opportunistically,” the petroleum division said.
Quoting different dates about G2G proposals, the petroleum division said Socar conveyed its interest in supplying LNG to Pakistan even on other pricing indices such as Brent and fixed dollar, but had not come up with its proposal so far.