Eni Earns $550 Million by Reselling Cancelled LNG Contract to Pakistan: Report

According to a report published Friday, Eni S.p.A. profited almost $550 million by canceling and then reselling contractual liquefied natural gas promised to Pakistan during the last two years.

According to Bloomberg, contract cancellations exacerbated Pakistan’s energy predicament, citing an investigation by SourceMaterial, an investigative organization, and Recommon, an Italian environmental organization.

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

According to the study, Eni’s LNG tankers ceased coming to Pakistan and instead went to Turkey for over two years. According to Bloomberg, the corporation denies any gain and claims that all undelivered goods to Pakistan were outside its reasonable control.

“Eni does not benefit in any way from the situation,” the business stated in a statement. “All previous disruptions in LNG delivery suffered by Eni were caused by the LNG supplier failing to meet the agreed-upon obligations.”

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

Meanwhile, in response to SourceMaterial’s questions, it called suggestions that it profited from defaulting on obligations to PLL “false and unfounded.”

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

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

The Pakistan government said “Non-supply of LNG cargoes by Eni is a contractual matter covered under the confidentiality provisions”, according to the source.

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 Recommon campaigner. “This investigation illustrates how their sole goal is to maximize their own profits at any cost.”

Eni’s agreement mandated the Italian power company to pay Pakistan 30% of the originally agreed-upon price for any undelivered cargo. However, the penalties were dwarfed by the market’s high spot prices in the aftermath of Russia’s 2022 invasion of Ukraine.

“High spot market prices make the penalties appear insignificant,” a senior industry executive in Pakistan told SourceMaterial.

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Pakistan has struggled to obtain spot LNG cargoes due to rising global petrol costs, which reached record highs last year following Russia’s invasion of Ukraine.

According to Refinitiv statistics, Pakistan imported 9 billion cubic metres (bcm) of LNG last year, a decrease of approximately 20% from 11.2 bcm in 2021.

Eni’s expected February delivery of an LNG cargo to PLL was halted earlier this year owing to a force majeure event.

“February LNG delivery disruption is beyond Eni’s reasonable control and due to an event of force majeure,” the firm stated in a statement to Reuters at the time.

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