Pakistan has accepted a liquefied natural gas (LNG) cargo at the highest-ever price of $30.6 per unit, quoted by Qatar Petroleum, to stave off a possible gas crisis in the country this winter.
The record high bid came in response to a tender floated by Pakistan LNG Limited (PLL) for the purchase of two LNG cargoes on an emergency basis to arrange gas supplies in winter months of December and January.
Earlier, commodity trader Gunvor and energy giant Eni defaulted on supply of LNG cargoes to Pakistan. PLL has short and long-term agreements with the two foreign companies for the delivery of one LNG cargo each every month.
However, the two firms backed down and refused to bring two LNG ships in the face of skyrocketing gas prices in the international market.
In its latest tender, PLL received bids from two suppliers - Vitol and Qatar Petroleum.
Vitol offered a bid of $29.8 per million British thermal units (mmbtu) for one cargo for the delivery window of November 19-20, 2021 while Qatar Petroleum quoted a price of $30.6 per mmbtu for the delivery window of November 26-27.
Pakistan has accepted Qatar Petroleum’s bid at the record high price of $30.6 per unit.
Though Vitol’s bid was lower than that, it was rejected as, according to sources, the LNG supplier offered cargo delivery between November 19 and 20. Pakistan did not need gas in November, rather it required LNG supplies in December owing to growing consumer demand in winter, they said.
That’s why PLL accepted the high bid of over $30 per mmbtu to meet consumer needs in December.
PLL has come in for a lot of criticism as it had not been able to develop proper strategies to arrange LNG cargoes when prices were lower in the international market.
At the same time, the private sector was not allowed to import LNG, though the government had given the go-ahead for LNG import by the private sector in July 2020.
Now, PLL has floated a tender to allow the utilisation of idle capacity of the second LNG terminal in the country.
The alleged mismanagement is going to put a burden of millions of dollars on LNG consumers. They may be paying the highest cost of LNG consumption in December.
The Cabinet Committee on Energy (CCOE) has emphasised the need for creating a competitive gas market. Similarly, the Oil and Gas Regulatory Authority (Ogra) has notified rules for LNG import by the private sector.
Owing to the monopoly of state-run companies, the consumers had paid $99 million in capacity charges over the last three years for the idle capacity of the LNG terminal.
Last year, Pakistan LNG Terminals Limited (PLTL) had floated a tender to pave the way for the private sector to utilise the idle capacity on a three-month rolling basis.
However, the private sector was later denied allocation of the idle capacity of the LNG terminal.
After failing to import LNG, PLL has now floated a tender to allocate the idle capacity to the private sector on a short notice. However, the private sector may not be able to import LNG due to the short time period and rising gas demand in the international market.
Published in The Express Tribune, November 7th, 2021.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.
COMMENTS
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ