Pakistan seeks LNG cargo for January delivery

LAHORE: Pakistan has floated a tender for a liquefied natural gas (LNG) cargo for delivery in January 2024, as it faces a twin challenge of gas shortages and high prices in the international market.

Pakistan LNG Ltd (PLL), a state-owned company responsible for procuring LNG, said on Monday it was seeking a "reliable LNG supplier" for one cargo to be delivered at Port Qasim in Karachi.

"PLL is seeking a reliable LNG supplier for supply of 01 LNG cargo for delivery in Jan 2024 to alleviate the natural gas supply shortfall in the country," it said on social media plaatform X.

The tenders will close on Nov. 24 and they will be opened on the same day at 1230 hours PST as per PPRA rules. The award notification date will also be on the same day, November 24, 2023. The bid for the LNG cargo has been announced for a volumetric quantity of 140,000 m3 (+/-2%).

Pakistan, which relies heavily on natural gas for power generation and domestic use, has been struggling to secure spot cargoes since April 2022, when a war between Ukraine and Russia disrupted the global LNG market.

The country has also faced soaring prices for imported gas, which have made it unaffordable for many consumers and businesses. Pakistan has to pay a premium of 15 to 20 percent on top of the already high spot prices, according to market sources.

Pakistan has two long-term supply contracts with Qatar for a total of 6.75 million metric tons of LNG a year, and a portfolio contract with Italy's ENI for 0.75 million metric tons a year. But these are not enough to meet the country's gas demand, especially in the winter months.

Although the country has faced a long dry period following the Ukraine-Russian war, with no success in attracting LNG sellers, a previous tender to procure LNG for December was successful when Vitol agreed to supply a shipment, but at a premium to already high spot prices.

Facing an uphill task of striking an LNG deal amid twin challenges of affordability and availability, Pakistan has had to float a tender for spot cargo amid reports that SOCAR, a state-owned company of Azerbaijan, has reportedly backed away from its commitment to provide an LNG shipment in January 2024.

According to market insiders, Pakistan's vulnerability as an LNG buyer is multifaceted. Owing to such multiple challenges, Pakistan may receive LNG offers in excess of $20 per mmbtu after adding the so-called premium to the offer price. Ultimately, end-consumers will have to pay the high price of imported regasified liquefied natural gas (RLNG), which is increasingly becoming unsustainable for the economy as well.

It may be noted that Pakistan has to rely on natural gas for power generation, especially in winter when hydropower shrinks to its lowest ebb. To meet demand for natural gas, Pakistan has signed two long-term supply deals with Qatar, one signed in 2016 for 3.75 million metric tons of LNG a year, and another signed in 2021 for 3 million metric tons a year. It also has an annual portfolio contract with ENI for 0.75 million metric tons a year.