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March 30, 2020

COVID-19: Qatar to supply three not five LNG cargoes a month

Top Story

March 30, 2020

ISLAMABAD: In an unusual development, Qatar has extended major solace to Pakistan by reducing the LNG supply to three cargoes from five in a month as was demanded by PTI government as country was unable to absorb the LNG mainly because of massive dip in its demand due to lockdown imposed in the wake of COVID-19 spread, a senior official at Petroleum Division told The News.

“This will also provide relief to the government per month as the LNG import from Qatar is at higher side which is locked for 15 years at 13.37 percent of the Brent. This means that there will be reduction in financial losses as the government will now not buy five LNG vessels from Qatar and purchase only three in month. Pakistan is bound to import 5 cargoes in a month for 15 years. In addition Pakistan buys LNG from Gunvor and ENI under three to five year tenders,” spokesman of Petroleum Division said.

The government was feeling the heat as it was not able to absorb the 100 percent contracted supply of LNG from Qatar keeping in view the drastic dip in RLNG use in the country on account of almost halt in economic activities on account of country wide lockdown imposed to keep away the 200 million people away from the brutal clutches of COVID-19. And on top of that the LNG transmission system was also on the verge of collapse as the line pack had reached at one time to 5.2 billion cubic feet.

Since Pakistan’s export industry has already been asked by buyers in Europe and USA, UAE and other economies to halt exporting shipments to them as their ports and docks are non-functional. As far as the local industry is concerned, the countrywide lockdown has also massively slowed down the indigenous industrial activities and is consuming just 146 mmcfd LNG and more importantly CNG sector is just consuming 20 mmcfd per day the RLNG because of massive dip in road traffic. Against the import of LNG of 810 mmcfd, the consumption on Sunday slightly increased to 490 mmcgd as power sector has increased LNG consumption to 300 mmcfd. When contacted, spokesman of Petroleum Division confirmed the development saying: “Yes, we have reduced 2 LNG cargoes per month with Qatar bringing to LNG supply to 3 cargoes from five in a month through mutual discussion, without invoking any force majeure clause.”

He further said that as regard to line pack, all efforts are being made to enhance off take by Power Division which was around 100-150 mmcfd has now increased to more than 300 mmcfd as of Sunday. The SNGPL is trying it's best to manage the system load which is under stress due to closure of industrial and commercial activities and lockdown of cities. According to the top official source, earlier the top mandarins of Petroleum Division were upset keeping in view the situation and a thinking process was very much underway to carve out the strategy as to how Pakistan takes up with authorities concerned in Qatar the issue of absorbing in the system the LNG from Qatar when the usage of the product in the country has touched its lowest ebb due to COVID-19.

It is pertinent to mentions that China, after coronavirus spread in Wuhan invoked force majeure for LNG deliveries from three suppliers but the supplying companies rejected the force majeure applied by China. Similarly, India also applied the force majeure clause and unilaterally suspended the LNG supply but the LNG supplier companies have gone into litigation against the decision. However, Pakistan’s authorities has not invoked force majeure clause for suspension of LNG supply, but with mutual discussion, Qatar has reduced 2 LNG cargoes to three from five in a month.