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June 11, 2019

Foreign tenders floated for 10 years LNG supply contract

Business

June 11, 2019

KARACHI: The government has invited bids from foreign suppliers for supply of liquefied natural gas (LNG) for 10 years as the demand of imported fuel is growing with depleting domestic gas output, The News learnt on Monday.

State-owned Pakistan LNG Limited (PLL) invited bids from international suppliers for supply of LNG on ten years term on a delivered ex-ship basis at Port Qasim as the country seeks consistent, reliable and cheap source of LNG, people familiar with the matter said. The supplier will be required to provide two consignments of 140,000 cubic meters each every month for ten years – a total of 240 consignments.

“Since we have a constant rather constantly increasing demand it is better to have a term contract,” an official at the petroleum ministry said. “The ten years term is with an option of five years walk-away, which effectively makes it a five years arrangement. PLL used to make spot purchases so far, which is quite erratic.”

The country’s demand for LNG could more than triple in the next three to five years, chief executive of PLL said at a conference in Singapore earlier this year. Last year, the country imported nearly 7 million tons of LNG. The import could grow to as high as 15 million and up to 25 to 30 million tons over the next three to five years, PLL’s Managing Director and Chief Executive Adnan Gilani said.

Pakistan is adding at least 300,000 gas consumers every year who consume local production at cheap rates elbowing out productive sectors to rely on imports. The country’s domestic gas output has plateaued in the last five years, falling to 1.46 trillion cubic feet in 2017/18 from 1.51 trillion cubic feet in 2012/2013, according to an annual report from the petroleum ministry.

The official said the country is procuring LNG from Italian oil and gas firm ENI at a slope of 11.99 percent of Brent. Swiss commodity trading company Gunvor supplied LNG at 11.62 percent of Brent, while the commodity was obtained from Qatar at 13.37 percent of Brent.

“We expect this term arrangement to be finalised somewhere in between 11 to 12 percent, and this slope would remain fixed for the entire term.”

The government mandated the PLL to carry out the businesses of the import, purifying,

buying, storing, supplying, distributing, transporting, transmitting, processing, measuring,

metering and selling of natural gas, LNG, and re-gasified LNG to meet the country’s gas requirements.

The existing two LNG terminals are nearly fully utilised while another two are expected to announce a final investment decision this year. The two import terminals have regas capacity of 1.2-1.3 billion cubic feet of gas per day, or about 9-10 million tons of LNG a year.

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