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December 12, 2020

LNG crisis: Petroleum Division puts blame on media

Top Story

December 12, 2020

ISLAMABAD: After failure to get bids for three LNG cargoes required in the first 18 days of the next month on Thursday, the Petroleum Division (PD) has swung into action to overcome the expected gas deficit in the first half of January. In this regard, here on Friday it floated an urgent tender seeking bids for LNG cargoes to avert the crisis. Thebids will be opened on Monday next (December 14), a senior official privy to the latest development told The News.

Under the urgent tender mode, the government never issues advertisement in national print media, rather it sends email directly to all potential LNG suppliers and trading companies informing them of LNG demand during certain dates with certain specification and in return they send their bids.

Since the force majeure situation has erupted because of zero interest of LNG suppliers in the earlier bids, the authorities in the Petroleum Division and top notches of Pakistan LNG Limited put their heads together to thrash out a way given the situation under which it has decided to go for urgent tender under the provision of 42 (d)-III of PPRA rules.

The authorities, while commenting on the zero interest in the bids for the first half of January, said that it has happened in the wake of a worldwide shortage of LNG cargoes, which has been further aggravated by LNG production shutdowns, especially in Australia (Gorgon, Ichthys, Wheatstone), Qatar, Algeria, Trinidad and Nigeria. Further, traffic issues at the Panama Canal are also delaying the US LNG shipments to Asia.

However, independent LNG experts said that the government should make contact with the Qatar Petroleum, which is also an LNG producing company to bailout Pakistan but surprisingly the government adopted to go for urgent tender, knowing the fact that there is a dearth of LNG in the global market, which is why LNG suppliers did not appear in the earlier bids and posed the question as to how they will come up with their bids in urgent tender bidding. However, experts also opined that the authorities concerned prior to floating the urgent tender may have contacted LNG suppliers, particularly Qatar Petroleum, to know if they will submit their bids. "It is the Qatar Petroleum that has provided relief to the government for the three LNG cargoes required in the second half of January at an average price at 16.5 percent of Brent."

Independent experts also maintained that Qatar Petroleum is a nearby country in the Middle East and it always possesses 15-20 additional LNG cargoes all the time. They said if the Qatar Petroleum takes part in the urgent tender bidding, it will be able to provide the spot cargoes for the first half of January.

They said that technically for LNG trading companies, it is an uphill task to provide LNG to Pakistan as the freight of LNG has also massively soared to US$85,000 per day from $25,000.

Meanwhile, the Petroleum Division in its clarification about media reports on LNG procurement for the month of January 2021 blamed the campaign by certain segments of the media based on incorrect analysis of the LNG market for harming the latest tender by causing some suppliers to stay away. However, it did not argue if it is the case, then why LNG suppliers participated in bids for LNG cargoes required in the second half of January.

According to the Petroleum Division, the government has secured 11 confirmed LNG cargoes (8 under term contracts and 3 under spot arrangements) for January 2021, being the highest number of cargoes in winter.

Pakistan procured 10 LNG cargoes in January 2019 and 11 in January 2020. Recent tender for January 2021 was floated in anticipation of the expected completion of a new pipeline by SSGC, which is going to be commissioned by December 15, 2020.

According to the clarification, it is also to be noted that the cheapest cargo Pakistan ever bought at $2.23 per mmbtu had only 39 days between bid opening and delivery, while previously the most expensive cargo bought at $10.27 had 71 days between bid opening and delivery.