Pakistan accepted an LNG cargo from Qatar Petroleum at a record high price of $30.6 per Million British Thermal Units (mmbtu) from Qatar Petroleum in an effort to avoid a probable gas crisis during the upcoming peak winter month.
Following default on commitments from firms namely Gunvor and ENI, Pakistan LNG Limited (PLL) floated emergency bids for the supply of two cargoes in November.
The PLL has short-term and long-term agreements with Gunvor and the ENI for the supply of one LNG cargo each every month, however, both suppliers refused to fulfill their part of the agreements leading to the state-owned firm calling a tender for two LNG cargoes to be supplied on an emergency basis for the months of December and January.
Although the bids required cargoes to be supplied between Nov 19-20 and Nov 26-27, the PLL opted to not use the first bid for the middle of November.
Qatar Petroleum Trading submitted the lowest tender for the delivery in the ending week of November at $30.65 per mmbtu, followed by Total Energies and Vitol Bahrain at $30.96 and $31.05 per mmbtu respectively.
As per reports from the Petroleum Division, the first tender regarding supply on Nov 19-20 was scrapped owing to the gas shortage in December. Hence, Qatar Petroleum at $30.65 per mmbtu was the lowest bidder for the supply on Nov 26-27. According to reports, re-gasification and injection of LNG into the system would be completed in December.
The PLL was criticized for not having proper strategies and for not making sure that sufficient LNG supplies were provided when the prices in international markets were low.
In addition to that, the state-owned entities limited the private sector from importing LNG in order to ensure the monopoly of the public sector was not challenged.
Chairman of All Pakistan CNG Association Ghiyas Paracha said, “The government has already floated the policy to allow the private sector to import LNG for their consumption and sale to various industries and sectors, but some government departments are creating hurdles in the implementation of this policy”. He added that the Petroleum Division and the Oil and Gas Regulatory Authority (Ogra) took notice of this situation as the national economy as well as the consumer was suffering owing to expensive imports.
Paracha added, “We fear that the price of Compressed Natural Gas (CNG) will go up by Rs8-9 per kg in December because of the single cargo being brought at the cost of $30.65 per mmbtu”.
The move to permit the import of LNG independently by the private sector had been under discussion since 2011. Ogra, in December 2018, green-lighted the use of the pipelines of the Sui Southern Gas Company as well as Sui Northern Gas Pipelines Limited by any third party upon condition that the third party would have to get licenses from the regulator along with other relevant authorities as well as pay the pipeline use charges to the respective companies.
The Cabinet Committee on Energy (CCoE) in November last year had highlighted the need to create a competitive market in the gas sector. The CCoE asked the private sector to play its part in ending the monopoly of both the state-owned gas utility companies – SNGPL and SSGC. However, at that time the idea failed to materialize owing to a lack of approvals and planning by the state-run gas utility companies.
Recently, the PLL has floated a tender to allot idle capacity of LNG terminals for the provision of LNG equivalent to 385 million cubic feet daily (mmcfd) gas on short notice for December. It has also floated a tender for the supply of 240 mmcfd and 275 mmcfd for January 2022 and February 2022 respectively.
The deadline to submit the application to obtain idle capacity at the existing terminals is Nov 18. Furthermore, the PLL has announced that the available re-gasification capacities might vary both on a daily and a month-average basis depending on the available berthing slots and the requirements of its own customers.
Answering a question about the offer by the PLL to use the idle capacity at LNG terminals, a private sector-licensed importer said the time provided to respond was too short.
Analysts on the other hand believe that the whole system requires revamping as it is difficult to determine the long-term demand and assess the idle capacity at LNG terminals.
Head of Research and Development at Pak-Kuwait Investment Company Samiullah Tariq noted, “There is a continuous demand from the power sector and there are other long-term customers, therefore, determining the idle capacity for a period of four to six months in advance seems difficult for the PLL”.
The PLL imports LNG at Port Qasim and supplies regasified LNG (RLNG) into the gas utility companies’ network.