by Khaleeq Kiani in Dawn, Dec 11th, 2020
ISLAMABAD: In a major setback to gas-starved consumers, Pakistan could not get even a single bid for three LNG (liquefied natural gas) cargoes meant for the first half of January and attracted the highest price for the second half of the month mainly because of delayed tenders amid rising international prices.
Pakistan LNG Limited (PLL) had issued tenders for six cargoes for delivery between Jan 8 and Feb 1. In response, no supplier or trader bid for the first three slots between Jan 8 and Jan 18. This is the first time that the country did not get a bid since it entered the spot market five years ago.
For the fourth January 20-21 window, only two bids were received with potentially unviable prices. The lowest bid of 17.32 per cent of Brent price for this slot came from a surprise first-time bidder, Qatar Gas, which is not in the spot market.
Qatar Gas also happened to be the only bidder for the fifth cargo for Jan 26-27 window and at the same price — 17.32pc of Brent. This is also for the first time that a lowest bid is more than $17, except the very first cargo that was purchased in 2015 for terminal testing.
The sixth and last cargo for Jan 29-Feb 1 received six bids and one was disqualified. The lowest bid of 15.32pc of Brent again came from Qatar Gas while all others were well above 20.48pc of Brent. One of the regular suppliers, Trafigura, offered the highest price of 33.94pc of Brent. These prices are again unprecedented.
Unfortunately, the LNG price above 17pc of Brent becomes unviable and costlier than high speed diesel, crude and furnace oil. This means power plants should be run on furnace oil instead of LNG and if the former is available at local refineries it also saves foreign exchange.
A part of LNG lined up through long-term Qatar Gas and similar older contracts will have to be diverted to the highly-subsidised residential sector. The price difference between imported and local gas thus works out at about $8 and $3.2 per mmbtu. The country will be facing at least 200mmcfd of LNG in the early part of January as Pakistan State Oil (PSO) had rejected similar bids recently.
Experts quoted three major reasons for poor response but noted a positive development in terms of direct producer and supplier Qatar Gas taking part in the bidding that would bode well for the future as traditional traders/suppliers would need to take into account the competition from a producer.
They said the delivery window of less than 45-60 days always carried a premium that happened with Pakistan. Also, an Australian project was closed which created supply shortages. Moreover, the launch of Covid-19 vaccine in major countries also jacked up LNG demand, thus increasing the prices of both LNG and oil. As if that was not enough, domestic controversies over LNG prices also kept some bidders away.
The only solution for the government now is to engage with Qatar at the highest level to fill up over 200mmcfd of gap in January. Otherwise, the existing supplies to the power sector would have to be diverted to domestic consumers to avoid widespread public outcry when opposition parties would already be on the roads.
Equitable tariff regime
Meanwhile, private sector stakeholders at a public hearing on Thursday demanded an equitable tariff regime for all companies, including from the public sector, to transport imported LNG through pipeline network. The hearing was conducted by the Oil and Gas Regulatory Authority (Ogra) for determination of transportation and distribution tariff for shippers/suppliers……..
www.dawn.com/news/1595090/lng-spot-market-cold-shoulders-pakistan
