Italian power giant, Eni S.p.A. earned about $550 million by cancelling and then reselling contracted liquefied natural gas promised to Pakistan over the last two years, stated a report published Friday.

The cancellation of contracts worsened Pakistan’s energy situation, according to Bloomberg, which cited an analysis by SourceMaterial, an investigative nonprofit, and Recommon, an Italian environmental group.

Read the SourceMaterial article here

As per the report, Eni, which has a 15-year deal to supply Pakistan LNG (PLL) from 2017 to 2032, failed to deliver a number of scheduled shipments between late 2021 and early 2023 under a contract to supply one LNG cargo a month.

During the almost two-year period, Eni’s LNG ships stopped going to Pakistan and headed to Turkey instead, it was stated in the report. The company denies it benefited and all undelivered cargoes to Pakistan were beyond the reasonable control of the firm, according to Bloomberg.

"Eni does not benefit in any way from the situation," said the company in a statement. "All the previous disruptions in LNG delivery suffered by Eni have been caused by the LNG supplier who didn't fulfill the agreed obligations.

"Also in these cases, Eni did not take advantage or benefit in any way from these defaults and applied all contractual provisions to manage such disruptions."

Meanwhile, in response to questions from SourceMaterial, it termed suggestions it had profited from defaulting on obligations to PLL as “false and unfounded”.

“All undelivered cargoes to PLL in Pakistan were beyond the reasonable control of Eni and were caused either by events of force majeure affecting the relevant LNG suppliers or by disruptions affecting the LNG supply chain,” an Eni spokeswoman told SourceMaterial.

“Eni has not benefited in any way from the situation and has in all cases evaluated and agreed alternative commercial solutions among the affected parties, including supply of replacement cargoes, rescheduling, and deferrals.”

The Pakistan government said “non-supply of LNG cargoes by Eni are a contractual matter covered under the confidentiality provisions", according to Bloomberg.

However, the analysts found that was not the case as the fuel destined for Pakistan was sold to Turkey instead which resulted in over half a billion dollars profit, citing estimates based on prices paid by Turkish gas company Botas at the time.

The report said that in 2022, Botas received 19 Eni cargoes from Damietta; while Pakistan got just one.

“Fossil fuel companies such as Eni want us to believe they are contributing to energy security,” said Alessandro Runci, a campaigner at Recommon. “This investigation shows how their only goal is to secure their own profits at any cost.”

As per Eni's contracts, the Italian power giant was required to pay Pakistan 30% of the originally agreed price for any undelivered cargo. However, the penalties were dwarfed by high spot prices offered in the market in wake of Russia’s 2022 invasion of Ukraine.

“High prices on the spot market make those penalties look insignificant,” a senior industry figure in Pakistan told SourceMaterial.

Prime International acquires Eni’s business in Pakistan: Hubco

Pakistan has struggled to procure spot cargoes of LNG amid elevated global gas prices, which spiked to record highs last year following Russia's invasion of Ukraine.

Pakistan imported 9 billion cubic metres (bcm) of LNG last year, according to Refinitiv data, down nearly 20% from 11.2 bcm in 2021.

Earlier this year, Eni’s delivery of a LNG cargo to PLL that was scheduled for February was disrupted due to an event of force majeure.

"February LNG delivery disruption is beyond the reasonable control of Eni and due to an event of force majeure,” said the company in a statement to Reuters back then.

Comments

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Hussain Apr 29, 2023 02:33pm
If contract was breached why don't we take them to international court like we were taken by Reko Diq?
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Truthisbitter813 Apr 29, 2023 04:49pm
@Hussain , Because they paid Pakistan the due 30% of the unfulfilled cargo. Any advantage they take from the situation from then on is completely legal and could only be termed as unethical.
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Shahid Akram Apr 29, 2023 06:36pm
Take them to court for financial losses
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Rapid Fire Apr 29, 2023 07:51pm
Paxtaan ka matlab kya... Allah ke Naam pe dein dein baba
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Kashif ALI Apr 29, 2023 11:52pm
The contract details would need to be checked. Force Majeure clauses are important. And also, failure to comply with supply will have some penalties which might have been adjusted on the next cargo charges. In short, Western Businesses are not naïve to inflict themselves such actions whose conflict and resolution cost will rattle their profitability and reputation. One can surmise that contract negotiations on our part might have been lenient OR most probably, we won't have much leverage for bargaining. So, RLNG contracts in whatever shape have been a blessing in disguise, given the current situation of indigenous gas resources. Last Word: My father was 5 years old when Sui gas had been discovered in 1953. At that time, its reserves were estimated to last 100 years. So, until 2053. But the ground reality is that this spendthrift and corrupt nation consumed the bulk of gas by 2010 (in just 57 years). America or Europe or Non-Muslims are not to be blamed for such fiasco.
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Azhar Apr 30, 2023 05:04pm
Is there any connection to allegations levelled at the then energy Adviser to PM Pakistan , for deliberate failure to place & procure pledged LPG
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Azhar Apr 30, 2023 05:05pm
Adviser to PM Pakistan was involved in this rip off
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Notsurprised Apr 30, 2023 07:23pm
Italians are the frauds and cheaters of Europe. Just as we Pakistanis are of Asia!
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Awami May 01, 2023 09:53am
@Truthisbitter813, Legal but not moral.
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Hilarious May 01, 2023 02:11pm
@Awami, what’s wasn’t moral was Pakistan signing for the 30% penalty in case of unfulfilled cargo, not the 130% that is usually the norm, blame the folks signing at Pakistan's end for 30% against what could only be kickbacks to their pockets. Once again, no one owes us anything, if anything most if not all of Pakistan's ailments are homemade thanks to rampant mismanagement and corruption at every level. Those talking about sui gas need to realize that gas prices in Pakistan are still some of the lowest on the world but still certain uniformed industries get it at 13% of its economic cost, subsidized by the taxpayer of course. Don’t blame eni for doing what a business does, which is the pursuit of profit, nothing is a charity, blame the ministers that know little to nothing about regulations, laws, trade norms etc. And then blame yourselves for putting those people in power. Merit died a long time ago in the country.
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Hilarious May 01, 2023 02:20pm
@Hussain , Because the contract was breached and the 30% penalty was paid, rather than the 130% that is usually the trade standard in the industry. If you’re looking for anyone to blame , blame the signatories on your end for probably taking kickbacks and bribes against such relaxed terms. It’s 30% when it’s country to country it’s 130% with trading companies like eni but they were given relaxed terms too. Which brings us back to just the usual of rampant mismanagement and corruption on every level at every scale. Don’t even get me started on ground water in the country, once the people realize how fast this natural resource is being wasted and looted, they probably won’t do nothing either, because this is Pakistan and the magic spaghetti monster will save us, and because the people are too busy with Shia, Sunni, Hindu, Christian, Pathan, Punjabi etc. When you can’t even get 4 people to agree on their own particular sect and what it means. Truly saddening.
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