ISLAMABAD: The government has decided to ink direct liquefied natural gas (LNG) supply deals with more energy-rich countries in the hope of securing cheaper contracts compared to spot purchases from energy companies.
The decision came after Pakistan received higher bids for spot purchases, which led to cancellation of a couple of contracts.
At present, Pakistan has a 15-year government-to-government LNG import agreement with Qatar, which has been shipping gas since March 2015. Now, the government has got engaged in talks with other countries as well including Russia and Malaysia to clinch state-to-state supply deals.
“State-owned Pakistan LNG Limited has been forced to scrap deals for two LNG ships due to higher quoted rates. Bids were invited for four cargoes and in response foreign companies made offers in the range of 13.2% to 16% of Brent crude oil price,” said a senior government official while talking to The Express Tribune.
Qatar is supplying LNG to Pakistan at 13.37% of Brent price and global commodity trading firm Gunvor is also bringing cargoes at the same rate. Apart from these, Pakistan LNG Limited sought bids for short- and long-term purchases and secured contracts at the best rate of 11.64% of Brent crude price. Short-term deal was signed with Gunvor whereas the long-term contract was won by Italian energy giant Eni.
The two companies will supply 200 million cubic feet of gas per day (mmcfd), meaning Pakistan LNG Limited needs to secure contracts for an additional 400 mmcfd, which will be supplied to three LNG-based power projects of 3,600-megawatt production capacity in Punjab.
Already, the second LNG terminal has started commercial operations in late November 2017 at Port Qasim in order to dedicate 600 mmcfd of LNG for the three power plants.
According to the government official, Pakistan LNG Limited planned to make spot purchases for the additional 400 mmcfd through six ships – two ships by Eni and Gunvor and the remaining four through spot purchases.
Consequently, the company invited bids, but the offers were made at higher rates compared to those for the existing deals.
Vitol submitted bids at 15.9147% of Brent price for March 8-9 delivery and 13.8301% for delivery on March 22-23. Trafigura offered its bid at 15.0591% of Brent price for March 27-28 delivery and BB Energy came up with the lowest bid at 13.2701%.
Earlier, these companies technically qualified for the supply of four cargoes in February 2018 at higher rates.
BB Energy submitted its bid for February 6-7 delivery at 15.731% of Brent price and Gunvor offered to bring cargo on February 16-17 at 16.0857%.
For February 21-22 delivery, Trafigura submitted its bid at 15.8488% whereas for February 26-27 delivery, the company quoted 14.9887% of Brent price.
Published in The Express Tribune, January 12th, 2018.