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Wednesday December 08, 2021

Massive gas crisis in January on cards: Govt faces shock as PLL receives no bids for January

December 11, 2020

ISLAMABAD: For the first time in Pakistan’s history, the government is set to face a huge LNG debacle in January, 2021 as LNG supplier companies

have not submitted bids for three earlier time slots till January 18. The development came to the fore when bids of spot cargoes were opened on Thursday for early part of January 2021 after bids for six LNG cargoes were sought.

For the first time ever, the international LNG suppliers didn’t offer bids for the time slots of January 8-11, 2021, January 12-14 and January 14-15. This has virtually put the top mandarins in the lurch as to how they will cater to the country's energy requirements in January when the RLNG demand touches new heights. The situation may force, according to a top official source, the government to declare RLNG emergency under force majeure clause, enabling it to arrange LNG putting the PPRA rules aside.

When Special Assistant to Prime Minister on Petroleum Nadeem Babar was asked about the development, he confirmed it. “Yes, PLL didn’t get bids because of everything that went on for one month, many bidders have stayed away. We have a back-up plan and will share it in one or two days.” However, according to the documents, Pakistan LNG Limited received expensive bids for a price tag of 33.9499 percent of Brent for three spot cargoes instead of six vessels and that too for the last three time slots of January.

The opening of bids on Thursday for January shocked the authorities as the traditional LNG suppliers Gunvor and ENI didn’t participate in bidding for January. However, the extremely-high bids were received for three LNG cargoes from January 20-21, 2021, January 26-27 and January 29, Feb 1, 2021 by the Pakistan LNG Limited.

Surprisingly, Qatar Petroleum has emerged for the first time and offered the lowest bids of up to over 17 percent of the Brent, forcing Pakistan to purchase the cargoes at a higher cost. Qatar Petroleum has offered the LNG cargo at 17.3203 percent of Brent for January 20-21, at 17.3207 percent of Brent for January 26-27 and at 15.3209 percent of Brent for January 29-February 01. Qatar Petroleum outpaced the LNG trading companies by a big margin.

Another company SOCAR offered bids at 20.4832 percent of Brent only for the last time slot of January 29-February 01, 2021, Trafigura offered bids for two slots of January 20-21 at 27.2727 percent of Brent and for January 29-Feb 01 at 33.9499 percent of Brent. Energy Asia/ENOC gave the bid at 24.8888 percent of Brent for January 29-February 01. Vitol also submitted its bid for the last time slot at 24.4321 percent of Brent. However, BP Singapore’s bid was disqualified for January 29-Feb 01, 2021.

Anser Khan, CEO Energas, termed the appearance of Qatar Petroleum as a good omen, arguing Qatar is an LNG producing country. LNG trading companies always cartelize the prices but the LNG producing country or company can offer lower bids. He warned of a looming LNG crisis from January 1-18, but Pakistan can resolve the issue if it holds bilateral discussion with Qatar Petroleum, he said. However, the media will take on the government as the bilateral arrangement does not require the PPRA rules implementation, he cautioned.

When asked why LNG trading companies did not offer bids for three earlier time slots till January 18, he argued that Gorgan company of Australia which used to produce LNG from 16.5 million tons to up 18 million tons per year has shut down its operations, creating LNG shortage in the international market. Gunvor and other LNG trading companies first purchase commodity from LNG producing countries or companies and then sell it to buyer countries. In the wake of shortage of LNG, trading companies are unable to submit their bids.