Monday Mar 28, 2022
ISLAMABAD: Pakistan seems to be witnessing another gas crisis in the summer season as well after the withdrawal of a Singapore-based LNG trading company from the commitment to deliver four LNG cargoes and Pakistan LNG Limited's (PLL) decision not to procure spot LNG cargo for April at the price of $34.677 per MMBTU offered by Vitol Bahrain in the bids opened on Friday, The News reported.
The Singapore-based company GUNVOR was supposed to deliver the LNG cargoes in the remaining months — one in each April, May and two in June — of its five-year contract ending in July 2022.
PLL had signed a five-year contract in June 2017 with GUVNOR, obliging the Singaporean company to supply the LNG term cargoes at 11.6247% of Brent. The company earlier pulled out of the contract thrice, first on November 19, 2021, second time on January 10, 2022, and then on March 11, 2022. This time, it is more than four times GUVNOR has defaulted taking the number of defaults to seven times in total.
GUNVOR cargoes were scheduled to arrive on April 15, May 14, and June 4 and 9, 2022, an official informed. But, the trading company informed Islamabad that it would not be able to deliver the LNG cargoes in its remaining tenure of the term agreement.
"The authorities in the Petroleum Division are extremely perturbed over the cancellation of four-term cargoes as, under the new scenario, they will not be able to cater to the demand of gas needed for the power sector in the summer season. The Power Division had submitted its demand of gas of 690mmcfd for April and 800mmcfd for May. Rather, the Petroleum Division will have to cut the RLNG gas supply to CNG sector and decrease imported gas supply to captive power plants by 50%," senior officials privy to the development said.
Top official sources said that the Sui gas companies Sui Northern and Sui Southern, under the new scenario, have shown their inability to cater to the gas requirements for the power sector for electricity generation, saying they can only provide 500mmcfd at the maximum, keeping in view the imported gas availability crisis.
Currently, the power sector is being provided gas at 400mmcfd and gas companies will arrange 100 mmcfd more for the power sector in April only after closing down the gas supply to CNG sector and decreasing the supply to captive power plants.
The reliance for electricity generation in the summer season would increase manifold on furnace oil and diesel-based power plants, which will result in more surge of power tariff.
Meanwhile, PSO has sought an additional amount of Rs60 billion to ensure the import of 23 fuel cargoes required to cater to the needs of the month of April. The PSO spokesperson, when contacted, said that PSO had an earlier plan to import 17 cargoes of fuel, but now it will import 23 cargoes with more vessels of furnace oil.
"We will be bringing 23 cargoes versus 17 and each incremental cargo is worth Rs10 billion, so we need Rs60 billion additional cash in April, " an official said.
"In case, if we don't get the additional amount of Rs60 billion, it would be difficult for PSO to open new LCs.”
Coming to the LNG sector, the Energy Ministry officials said Pakistan will have eight LNG cargoes for April against the demand of 12 cargoes. Pakistan State Oil (PSO) will import seven cargoes and PLL only one cargo, which is a term cargo to be provided by the ENI. However, PLL authorities are still not sure whether PLL will manage the term cargo from ENI or not.
Meanwhile, Pakistan LNG Limited (PLL) also failed to get LNG from the spot market at a reasonable price; rather it got the lowest bid at a higher price of $34.6777 per MMBTU of one cargo for April and $33.53 for May. The government has decided not to buy the cargo for April as its lowest price stands at $34.6777 per MMBTU and when taxes and margins will be included, the price for consumers will go up to $40 per MMBTU.
The decision will lead to gas crisis even in the month of April as the government will only manage eight LNG cargoes against the demand of 12 cargoes.
PSO will import seven cargoes and PLL only one term cargo to be provided by ENI. But the authorities are still not sure whether the PLL will manage the term cargo from ENI or not.
As per the results of the bids opened on Friday and uploaded on PLL’s website, Pakistan LNG Limited on March 17 issued an emergency tender seeking bids from LNG trading companies for two LNG cargoes, one for April 21-22 delivery window and the second one to be delivered on May 14-15, 2022. The management got seven bids from four companies that include ENOC Singapore, PetroChina, TotalEnergies and Vitol Bahrain. Vitol Bahrain came up with the lowest bid of LNG cargo at the price of $34.677 per MMBTU to be delivered on April 21-21 and PetroChina came up with the bid price of $33.6777 per MMBTU for the time slot of May 14-15.
Top sources said that PLL has decided not to procure the spot LNG cargo for April offered in the bids by Vitol Bahrain at $34.6777 per MMBTU for April, saying the price is at the higher side.
Official sources said that with port insurance charges, taxes and margins, the cargo price would hit over 40 dollars. The PLL has refused to purchase the spot cargo since K-Electric has declined to take this expensive gas.
The PLL agreement with KE states it can only sell on cargo price and not on basket price consisting of government-to-government cargoes.