Government is in liquefied natural gas (LNG) supply talks with France, Italy and Spain, a senior Pakistani source said, which could lead to contracts for Engie, Eni and Gas Natural Fenosa. Intergovernment agreements (IGAs) could help Pakistan speed up its ambitious plans to bolster LNG imports as it aims to end the country''s chronic energy shortages. Pakistan opened its second LNG import terminal in Karachi last week and Prime Minister Shahid Khaqan Abbasi said up to five more terminals are in the works.

Islamabad aims to source about 3 million tonnes of LNG per year for the new terminal through intergovernment deals, or about four cargoes per month, a senior Pakistani energy official told Reuters. Abbasi said he expects Pakistan''s demand to grow to 30 million tonnes in three years, which would make it a major LNG buyer. It is already one of the fastest-growing LNG markets, attracting interest from producers such as Shell and ExxonMobil and from traders such as Trafigura and Gunvor.

Pakistan last year agreed a deal with Qatar to supply 3.75 million tonnes per year for its first LNG terminal and this year in an open tender it awarded Eni a 15-year supply contract. But progress on further European contracts has been slower than expected as governments look to ensure deals do not violate European Union (EU) regulations, some officials said. "The Europeans were first to begin discussions but they were delayed because of their regulations," the Pakistani official said.

He said that once intergovernment deals are signed with France, Italy and Spain, Engie, Eni and Gas Natural Fenosa could begin commercial negotiations with state-owned Pakistan LNG. A second senior government official confirmed Pakistan was in discussions with Italy. Eni is also in discussion with at least one consortium looking to build an LNG terminal in Pakistan, two other sources familiar with the discussions said. The three European governments and companies all declined to comment.

COMPETITION AND PRICE

Russia, Malaysia, Turkey and Azerbaijan have all signed IGAs with Pakistan and their companies have begun commercial negotiations. Pakistan expects to sign deals with Indonesia and Oman soon. The Pakistani official said Islamabad wants to act fast and is in advanced negotiations with Malaysia''s Petronas, Russia''s Gazprom, Turkey''s Botas and Oman Trading International.

"Price will be the deciding factor, coupled with reliability and certainty of delivery," he said. Eni''s 15-year supply contract was priced below 12 percent of a barrel of Brent crude oil, while Gunvor won a 5-year contract at 11.62 percent. Eni had initially offered a price of 12.29 percent but agreed to lower this to 11.62 percent for the first two years, 11.95 percent for the next two years and 12.14 percent for the remainder of the term, sources with knowledge of the matter said. Islamabad wants to secure more 15-year contracts with terms renegotiable after 10 years, akin to the Eni deal, the Pakistani official said.

Copyright Reuters, 2017