Large portions of the 89-page LNG contract uploaded on the PSO website are blacked out due to a confidentiality clause (25.1) including the contract price (though this information was shared by the then Minister for Petroleum and Natural Resources Shahid Khaqan Abbassi), the adjusted annual contract quantity, annual upward flexibility quantity, downward flexibility quantity, annual make good quantity, buyers obligation to take or pay, net proceeds, take or pay or make up LNG by buyer, and payment schedule.
The agreed contract price is 13.37 percent of Brent which is to be calculated as the arithmetic mean for a given month of the three values of BRICE (US $bbl) for three months immediately preceding (and not including) the month in which the commencement of unloading of relevant cargo falls, while BRICE is defined as the average of all settlement prices (US$/bbd) for each quoted day of the month as published by the International Exchange of the first line ICE Brent futures contract.
The LNG price for September 2017 to the consumer as per Oil and Gas Regulatory Authority notification for September 2017 is 9.2 dollars per mmbtu while the spot rate (Japan) for LNG was much lower at 5.8 dollars per mmbtu. The following critical clauses have not been shared with the public in the document uploaded on the PSO website:
Clause 15.2.4: "if within a period of six months after the Price Review Notice was issued the Parties have not agreed upon a price adjustment either party may terminate this agreement upon giving notice to the other party and such notice shall come into effect at the end of the Contract Year during which it is served."
Clause 17.4.1 "Payment: The Buyer shall pay the amount payable under an invoice issued pursuant to Clause 17.2.1 (b) and/or clause 17.3.1 {neither is blocked in the uploaded PSO document} on or before the date which is the later of (a) the 15th day after completion of unloading; and (b) the 10th banking day after receipt of invoice by the buyer.
Clause 17.4.2 "Except where otherwise stated in this agreement payment of all other invoices including those issued pursuant to Clauses 8.3.1, 17.2.2., 17.2.3, 17.3.2, 17.4.4, 17.5.1 and/or 17.6 shall be made on or before 5 banking days after receipt of invoice.
Clause 17.8.1: "Standby L/Cs would cover 105 percent of the sellers estimated value of "(a) three cargoes(based on the average Standard Cargo Content - SCC- for the prevailing contract year, if the ACQ (Annual Contract Quantity) is equal to or less than 117 million mmbtu (or approximately 2.25 million metric tons and (b) 6 cargoes (based on the average SCC for the prevailing contract year if the ACQ for the following contract year is equal to or greater than 195 million mmbtu (or approximately 3.75 million metric tons) of LNG provided that in respect of the 2017 contract year the buyers obligation to increase the value of the standby letters of credit to 105 percent of the sellers estimated value of 6 cargoes does not commence either on (i) the date which is 30 days prior to the start of the month which the buyer nominates as being the month in which it wishes to receive an increased volume of LNG in accordance with Clause 6.1.3 or (ii) failing receipt of such a notice the date which is 30 days prior to 1 June 2017.
Clause 17.8.5 notes that if the credit rating of a confirming bank deteriorates below the acceptable credit rating the buyer shall provide a replacement standby letter of credit within 7 banking days from the notice by the seller of such credit rating deterioration (which would be as per Standard and Poor or Moody's).
Copyright Business Recorder, 2017