Pakistan gets up to 38pc lower LNG rates through revised bids

Published January 27, 2021
Pakistan on Wednesday received significantly cheaper bids for three cargoes of liquefied natural gas (LNG) to be delivered in March under an urgent tendering process.— AFP/File
Pakistan on Wednesday received significantly cheaper bids for three cargoes of liquefied natural gas (LNG) to be delivered in March under an urgent tendering process.— AFP/File

ISLAMABAD: Amid falling international market, Pakistan on Wednesday received significantly cheaper bids for three cargoes of liquefied natural gas (LNG) to be delivered in March under an urgent tendering process.

The state-run Pakistan LNG Limited (PLL) had last week cancelled bids for LNG deliveries in March for three windows as prices in the international spot market started to crash. For replacement, the PLL went for a revised urgent tender on January 22 with deadline of January 26. The revised bids attracted 26 to 38 per cent cheaper rates when compared with the cancelled bids.

Results obtained from PLL showed the lowest bid of 13.62pc of Brent for cargo delivery in second week of March from ENI of Italy when compared to 22.24pc of Brent from the same company. This showed a reduction of almost 38pc within a week.

ENI also turned out to be the lowest bidder for a cargo in the third week of March with 13.62pc of Brent when compared to 17.81pc of lowest bid from Vitol for the same delivery window, showing a lower rate of 23.5pc.

The lowest bid for the fourth week of March came out to be even lower at 12.73pc of Brent from Qatar Petroleum as against 17.19pc of Brent lowest bid quoted by Vitol in the previous bid, showing a reduction of 26pc.

The revised urgent tendering also attracted more bidders — a total of 20 bids for three delivery windows — when compared to a total of 12 bids previously, indicating that prices were easing in the spot market as demand dropped over the past couple of weeks.

The revised rates range between $6.6 and $7.2 per MMBTU when compared to more than $8.9 per MMBTU rate under previous bids. This showed that ever since the Emirates National Oil Company defaulted from its bid for supplies in February as the spot prices peaked, the participation by Qatar Petroleum appeared contributing reduction in the bid prices for Pakistan.

Qatar Petroleum had offered $8 per MMBTU or 16.3pc of Brent for February 25-26 window after Emirates National Oil Company (Enoc) had moved out its bid of $10.22 per MMBTU or 20.09pc of Brent for February 23-24. PLL was ready to even award contract for LNG cargoes to second and third bidder for the fourth week of February but they also declined.

Under the long-term contract, Qatar is providing LNG to Pakistan at 13.37pc of Brent. Two major factors that contributed to the LNG market crash included an intervention by Japan’s energy regulator to exit the spot market in an attempt to ensure that power prices do not go up further amid warmer weather conditions and South Koreans decision against securing additional gas for February.

As a consequence, LNG traders hoarding the product had nowhere to offload their cargos, thus a fall in spot market. At present, European and Far Eastern importers are paying about $7.5 and $8.2 per MMBTU respectively. Market analysts now expect the LNG prices going down further to 10-12pc of Brent or about $5-6 per MMBTU in April onwards period until October next year.

Published in Dawn, January 27th, 2021

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