LAHORE: Pakistan has taken yet another shot at importing LNG amid surging energy cost as last week’s tender was bound to be cancelled due to least interest shown by potential bidders.
With a view to ease domestic shortage and meet demand of power sector, Pakistan LNG Ltd (PLL) floated a tender for the supply of four cargoes for the month of July. The LNG to be delivered under this tender will include each cargo having a volumetric quantity of 140,000m3. As per schedule of delivery, LNG bids are being invited to deliver natural gas by July 03, July 08, July 25, and July 26, 2022.
During this period, not only LNG demand for the power sector would be high. However, it will be an uphill task for a country like Pakistan to buy LNG amid a surging spot market with squeezing supplies.
The import of LNG is unlikely to be as easy as it was a couple of years back due to spiraling Asian LNG spot prices that have nearly doubled this week to $40/mmBtu, primarily due to global supply crunch owing to the Ukraine-Russia war. It may be noted that Pakistan’s most expensive spot purchases still stood at around $30/mmBtu. The crippling domestic power shortage necessitates import of natural gas for running thermal power plants. To meet this huge challenge, the government is struggling to secure enough LNG to generate electricity with a view to avoid 10-12 hours of daily blackouts.
In such testing times, Pakistan has been facing immense difficulties in sourcing LNG from the spot market. Pakistan last week failed to receive even a single qualifying bid for two tenders, seeking a July 3-4 delivery LNG cargo. The problem not only relates to the spot market, but also to several of those cargoes (under long-term deals) that were withheld by the suppliers, further exacerbating dwindling fuel supplies.
It is worth mentioning here that the federal government paid a record around $100 million to procure a single LNG shipment from the spot market in a bid to avoid blackouts during the Eid holiday last month.
It may be noted that gas shortages have compelled Pakistan to depend on LNG imports since 2015. However, rising trends in the energy market made imports costlier with every passing day and Pakistan is facing immense problems in securing LNG supplies. Spot Asia LNG rates are trading three-times higher than normal for this time of year. And this crisis seems to be lingering on for the foreseeable future. The global LNG supply could stay tight over the next several years as Europe is trying to switch to other markets in order to cut Russian gas supplies following the Ukraine war.