Pakistan resumes LNG spot buying as demand surges

KARACHI: Pakistan has resumed spot buying of liquefied natural gas (LNG) from the international market after six-month pause as energy demand is ramping up with easing lockdown, it was learnt on Monday.

State-run Pakistan LNG Limited (PLL) invited bids for supply of three LNG cargoes – 140,000 cubic meters each – to be delivered in August and September. PLL invited bids from international suppliers for the supply of three LNG cargoes on a delivered ex-ship basis at Port Qasim. The first delivery window is August 27-28, second from September 12-13 and third from September 25-26.

PLL floated its last LNG spot purchase tender in November last year for cargoes to be delivered in February.

The spot buying followed resumption in import of oil products in May after a month-long ban that created shortage in the market. Imports were allowed as domestic demand picked up after nationwide COVID-19 lockdown eased.

The lockdown was imposed in late March to prevent spread of novel coronavirus. Consumer demand slackened and industrial production was brought to halt. Oil ban was justified to help oil marketing companies and refineries whose storages could go full to the brim.

However, under the less stringent smart lockdown in place now, commercial and industrial activities have resumed as the country gradually restarts economic activity.

Asian spot LNG prices remained stable this week, with demand still sluggish in an oversupplied market. The average LNG price for August delivery into northeast Asia was estimated at around $2.20 per million British thermal unit, the same level as the previous week, according to market reports.

Annual import of LNG is expected to rise to 15-30 million tons over the next four to five years, according to official estimates. 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.

Analysts said LNG imports have saved Pakistan around $5 billion over the last five years, after it substituted the expensive oil imports. LNG contributes 22 percent in the country’s energy mix, while its share in the country’s energy imports stands at 24 percent.

Though LNG price is linked to international crude oil, its energy generation is considered much economical than oil. This plays a significant role in meeting local demands, as domestic gas resources are depleting, while new significant discoveries have not been made over last several years. Since 2015, over 19 million tons of LNG has been imported, while two re-gasification LNG terminals are operational and several in queue.