Let down by UAE firm, Pakistan seeks two LNG cargoes

Published January 20, 2021
The government has sought urgent tenders for liquefied natural gas (LNG) deliveries in third and fourth week of February. — Reuters/File
The government has sought urgent tenders for liquefied natural gas (LNG) deliveries in third and fourth week of February. — Reuters/File

ISLAMABAD: The government has sought urgent tenders for liquefied natural gas (LNG) deliveries in third and fourth week of February to fill the gap arising out of a default by Emirates National Oil Company (ENOC) on its supply commitment.

A senior official at the Ministry of Energy (Petroleum Division) confirmed that two cargoes had been sought from the international market using emergency provisions of the procurement rules. He said Pakistan LNG Limited (PLL) — the state-run entity responsible for import of LNG — had approached prospective suppliers for LNG delivery on Feb 15-16 and Feb 23-24.

In such circumstances, normal tendering schedules become impractical and, therefore, bidders have been asked to submit their bids within three days i.e. latest by Jan 22.

On Sunday, PLL confirmed that the UAE firm ENOC had defaulted on its bid.

PLL had advertised a tender on Nov 28, 2020 for procurement of two spot LNG cargoes for delivery in February. On Dec 28, bids were opened and results announced and, in accordance with the PPRA Rules, the award intimation was made 10 days later, on Jan 7.

The first spot cargo for mid-February was awarded to SOCAR Trading UK Ltd — an entity of Azerbaijan. The second spot cargo for the last week of February was awarded to the lowest bidder, as per the PPRA Rules, which expressed inability to deliver as per its bid, PLL said, adding that it had approached the 2nd and 3rd lowest bidders within the bid validity period, but they regretted to deliver the cargo at the prices they had offered in their respective bids.

Sources claimed that SOCAR was also finding it difficult to honour its bid and, therefore, the second tender was sought for delivery on Feb 15-16 to replace the SOCAR cargo.

Special Assistant to the Prime Minister on Petroleum Nadeem Babar and Petroleum Secretary Asad Hayauddin did not respond to calls for comment.

“This bid default of the suppliers is associated with the recent supply shortages leading to high price volatility in the spot market, coupled with extra buying in North Asia,” PLL said, adding that numerous global companies were reportedly defaulting on their bids and even contracts in some cases, given the supply shortages and extremely volatile prices.

PLL said in a statement on Sunday that “suppliers who have regretted to supply after bidding in the PLL tender include state-run entities and major international LNG traders”. The company said it was taking all measures available under law and PLL’s tender process, including forfeiture of bid bonds, against the bidder(s) who failed to supply cargo as per their bids.

Since February is a low demand month, Pakistan has been importing 7.75 cargoes on average in February for the last four years. At this time, a total of eight cargoes are secured.

PLL said that it was working with the respective users to reconfirm demand at the current prices and was exploring alternatives if demand for an additional cargo in February was reconfirmed.

SOCAR had offered the bid at 23.4331 per cent of Brent for Feb 15-16 window. ENOC had quoted 20.948pc of Brent for Feb 23-24 window, but later walked away.

Published in Dawn, January 20th, 2021

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