To meet the rising demands of electricity shortage in the country, Pakistan has ordered one of the most expensive LNG cargoes in its history. The energy-starved country was forced towards this decision as two major commodity trading companies defaulted on their agreements to supply LNG cargoes for the months between April and June. Shortly after, the state-run Pakistan LNG Ltd floated six tenders for the months between May to June in the spot market, following which it accepted bids ranging from $24.15 to $32.6 per million British thermal units (mmBtu).
One of the most pricey LNG cargoes ordered!
Pakistan has decided to accept a total of six LNG cargoes at bid prices between $24.15 and $32.6 per million British Thermal Units (mmBtu) for delivery from May 1 to June 22 period— Economy of Pakistan (@Pakistanomy) April 22, 2022
In the bid, a total of five bidders participated and made 12 bids for the floated tenders. After getting the average price of spot cargoes and term cargoes under GtG long contracts, available at 13.37% and 10.2% of the Brent, authorities decided to purchase all cargoes to run RLNG-based power plants instead of running diesel-fired and furnace oil power plants.
Commenting on the recent development, a senior official at Petroleum Division said, “RLNG-based power plants will be able to produce power at lower rates as compared to furnace oil and diesel-run plants,”. He added, “This will help slice down average power tariff bringing solace to all categories of power consumers in the country.”
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The main bidders were Total Energies, Vitol Bahrain and Qatar Energy. For the month of May, three slots were offered, and all of the companies secured one slot each, with QatarEnergy at $24.15 per mmBtu being declared the lowest evaluated bidder for May 12-13, Vitol Bahrain at $31.778 per mmBtu for May 17-18 and TotalEnergies at $26.87 per mmBtu for May 27-28.
Bidding also took place for the month of June; however, it is important to note that no company bid for the June 1-2 slot.
Earlier, the Singapore-based commodity trading company Gunvor sent out refusal notices to Pakistan ahead of the expected delivery of LNG cargoes to the country. According to the letter, four LNG cargoes previously scheduled to reach Pakistan between April and June would not enter the Pakistani market, forcing the government to purchase LNG on the spot market, which hit its record high over concerns of lack of supply amid the Russia Ukraine war.
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The Energy Ministry received the letter on the 26 of March, and it stated that the commodity trading company would not be able to ship four LNG cargoes that, as per contracts, were scheduled for delivery on April 15, May 14, June 4, and June 9.
Another gas trading company Eni also defaulted on its contract for delivery in March. The company cited supply chain disruptions for their failure to deliver upon the stated agreement and forced Pakistan to call for a last-minute bid.