The looming winter gas crisis has forced Pakistan to buy gas from Qatar at the highest prices ever — $30.6 per mmbtu. In October, Pakistan issued a tender seeking eight LNG cargoes for delivery in December and January, but received no bids. This unusual occurrence was because the tender was floated for 15 days, which is a farcically long time given the volatility of energy prices in international markets. This alone suggests that the people making oil and gas policy decisions know little about how the sector works. Then there is the problem of storage capacity. Pakistan actually did receive a slightly lower offer — $29.8 per mmbtu — for delivery around November 19, rather than the November 26 delivery date of the Qatar bid. That one week alone is going to cost the exchequer millions.
At the same time, the gas crisis is by no means local. On October 6, S&P Global Platts’ Japan-Korea-Marker — considered a spot benchmark for Asia — climbed to $56.3 per mmbtu for a cargo delivered to North Asia in November. Spot cargoes for December went for over $57 per mmbtu. Experts blamed the surge on European gas prices after forecasts of lower wind and cooler weather. The increased European demand exerted upward pressure on LNG prices in the Asia-Pacific as the region’s traditional suppliers saw new opportunities in Europe. Production issues in Russia and Indonesia also affected supplies to Asia.
At the same time, the government-owned Pakistan LNG Limited (PLL) failed to capitalise on the fluctuations by putting out sensible tenders when prices were low. Meanwhile, PLL is allowed to maintain a monopoly forcing taxpayers to pay for its awful decision-making. Even though the government has, on paper, allowed private imports, the state machinery has been delaying implementation. Even now, PLL is trying to save face by floating a short-notice tender to allocate idle LNG terminal capacity. The problem is that prices tend to rise in the early winter months, meaning that private parties are unlikely to find a good deal and will have to rely on PLL.
Published in The Express Tribune, November 10th, 2021.
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