May 3, 2017 / 8:54 AM / 3 months ago

Eni wins 15-year contract for LNG supply in Pakistan

3 Min Read

LONDON/MILAN (Reuters) - Italian oil company ENI said on Tuesday it had clinched a 15-year, 11 million-tonne liquefied natural gas (LNG) deal to supply state-run importer Pakistan LNG, ending months of wrangling over the cost of the supplies.

The announcement of the deal has been delayed since January when Eni emerged as the clear winner of a tendering to Pakistan LNG to secure vital supplies for the country's gas-starved domestic market.

At issue was trading house Gunvor's deal to supply Pakistan with LNG for five years, in a separate but parallel tender, at a price significantly below that which Eni submitted in its 15-year offer.

While Pakistan swiftly approved Gunvor's deal, officials there started negotiations aimed at persuading Eni to more closely align its prices with that of Gunvor, a Pakistani energy official and industry sources told Reuters.

The outcome of the negotiation resulted in Eni lowering its price, industry sources said. Eni was not immediately available to comment.

Multi-year LNG tender deals tend to be linked to Brent crude oil prices, expressed as a percentage. Gunvor's winning bid for the five-year supply tranche came in at 11.6247 percent, and Eni's winning bid for the 15-year tranche was 12.29 percent, according to a tender document seen by Reuters.

Eni will source most of the LNG for Pakistan from Indonesia, it said. Indonesia's Bontang export facility will soon be fed by the Jangkrik gas field which the Italian group expects to bring on stream in a few months, it said.

"Eni will supply to the state company Pakistan LNG a cargo per month during the next 15 years, for a total of 180 cargoes, corresponding to 11 million tonnes of LNG," it said.

Eni believes new LNG production will be required early in the next decade and has committed to developing its own LNG business in areas like Indonesia and Mozambique.

Last year it agreed to sell to BP its entire output from the Coral floating LNG production plant in Mozambique for a period of 20 years.

In March it sold a 25 percent stake in its giant Mozambique gas development, known as Area 4, to Exxon for $2.8 billion, a key step towards developing multiple LNG export facilities in the country.

Rreporting by Oleg Vukmanovic in London, Stephen Jewkes in Milan, Jorgic Drazen in Islamabad; Editing by Greg Mahlich

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