Pakistan LNG receives four bids above $18/MMBtu for January spot cargo

LAHORE/ISLAMABAD: Pakistan on Friday received four bids at higher prices ranging from $18.46 to $19.64 per million British thermal units (MMBtu) for one spot liquefied natural gas (LNG) cargo required on Jan. 8-9, 2024, at Port Qasim, an evaluation report by Pakistan LNG Limited (PLL) showed.

The state-owned PLL had sought bids from LNG trading companies for one spot cargo carrying 140,000 cubic metres through a single-stage, two-envelope procedure. The bids were submitted by OQ Trading, QatarEnergy Trading, Trafigura and Vitol Bahrain, and all of them were technically qualified.

OQ Trading offered the lowest bid of $18.46 per MMBtu, followed by Vitol Bahrain at $18.58, QatarEnergy Trading at $19.43 and Trafigura at $19.64 per MMBtu. OQ Trading offered the lowest bid, but the price was still higher than the previous spot cargoes procured by Pakistan LNG.

The country’s oil and gas regulator, the Oil and Gas Regulatory Authority, notified the prices of regasified LNG for November at $13.49 per MMBtu, up 1.2 percent. The prices for January are expected to increase by 80 cents to 1 dollar per MMBtu if the government procures the LNG cargo from OQ Trading at $18.46 per MMBtu.

Industry offcials said the bids were close to the prevailing spot prices in the international market, reducing the premium on LNG imports to Pakistan to around 10 percent.

Earlier this year, Pakistan received offers of over 30 percent premium from LNG trading companies, and last year it failed to find any spot cargo due to lukewarm response from LNG suppliers.

Sources said multiple factors contributed to Pakistan's re-emergence in the LNG spot market after a gap of more than a year, including an improved bidding process by PLL, the International Monetary Fund's fresh nod for continuation of a loan deal with Pakistan and the easing of a global LNG crisis that started with the Ukraine-Russia war.

Pakistan has notably reduced the bidding process from over a month to just five days to a week, which has attracted more LNG trading companies.

PLL had to seek bids for one spot LNG cargo for January 2024 after SOCAR, a state-owned company of Azerbaijan, showed its inability to offer one distressed LNG cargo to PLL for the same month, which is the peak winter month in Pakistan.

Previously, PLL received the lowest bid from Vitol Bahrain at $15.97 per MMBtu for two spot cargoes for December 2023. However, PLL also asked SOCAR to provide one cargo with a 10-20 cents lower price than the Vitol cargo price. Owing to this issue, the bids for January came up at higher prices.

Pakistan will start getting four-term cargo at 10.2 percent of the Brent from Qatar instead of three cargoes. The country is already getting five cargoes from the same country at 13.37 percent of the Brent at terminal one. ENI is also providing one-term cargo at 12.05 percent of the Brent price. And if PLL procures the OQ cargo at $18.46 per MMbtu, even then the country will face a gas deficit of 170 MMCFD in January in the Sui Southern system.

However, in Sui Northern’s system, the gas deficit would be at 300 MMCDF in January, and the gas shortfall will remain in December at 360 MMCFD, which will increase in January to 470 MMCFD. In January, the gas crisis may increase because of the non-availability of LNG cargo from SOCAR.

Since the demand for gas in Sui Northern goes up to 1,100 MMCFD in December and 960 MMCFD in January, the country needs two more spot cargos in January. This seems difficult as the bidders will come up with inflated prices, keeping in view their last bids experience. The local gas production has reduced to 3.19 bcfd, and it is decreasing by 9-10 percent every year.