ISLAMABAD: Amid an influx of inflationary events, the unavailability of liquefied natural gas (LNG) in an expensive international spot market has come as a blessing in disguise for Pakistani consumers as the average LNG cost has dropped by more than 15pc for July owing to long-term supply contracts with Qatar.

According to a notification issued by the Oil and Gas Regulatory Authority (Ogra) on Friday, the average basket price for the supply of imported Regasified Liquefied Natural Gas (RLNG) to two gas companies — SNGPL and SSGCL — has dropped by 15-16pc to $16.19 and $15.78 per million British thermal unit (mmBtu), respectively at transmission stage for July when compared to $19.07 and $18.8 per mmBtu in June.

The RLNG price at the distribution stage has dropped to $17.46 and $17.96 per mmBtu for SNGPL and SSGCL, respectively, down by 15.93pc and 20.57pc. The price notification showed that five cargoes were brought in at 13.37pc of Brent or $13.65 per mmBtu while three cargoes came in at the rate of 10.2pc of Brent or $11.38 per mmBtu.

As such, the RLNG consumer price at the distribution stage is down by $3.31 per mmBtu for SNGPL and $4.65 per mmBtu for SSGCL in July when compared to June. It may be noted that LNG’s basket price in May had touched a record $22-24 per mmBtu owing to a string of spot cargoes procured by the new coalition government in the first month in office to meet energy shortages.

Imported price of RLNG drops over 15pc in July

Since then, repeated efforts to import more gas through spot tenders have remained futile owing to tight supply conditions and record prices in the international market following the Russia-Ukraine war. As such, all the eight cargoes in July available to Pakistan were under long-term contracts with Qatar and not a single cargo could be arranged from the spot market.

Mainly because of expensive spot imports in June, the average LNG-based power generation cost amounted to Rs28.4 per kWh (unit) — the second most expensive source of power generation after Rs36.2 per unit on furnace oil.

As a consequence, the fuel cost adjustment (FCA) for electricity would increase by almost Rs10 per unit in August. With lower LNG cost, the FCA for power generation in July is expected to be cheaper than that of June.

The average sale price for Lahore-based SNGPL had stood at $21.83 per mmBtu in May, up 40pc from $15.616 per mmBtu in April. Likewise, the average RLNG sale price for Karachi-based SSGCL had stood at $23.79 per mmBtu in May against $16.91 per mmBtu in April, showing an increase of about 41pc.

Pakistan has two long-term contracts with Qatar, one involving six cargoes at 13.37pc of Brent signed by the previous PML-N government and two to three cargoes contracted by the PTI government at 10.2pc of Brent.

The average cost of six long-term contract cargoes of PSO-Qatar stood at $5.78 per mmBtu in December 2020.

Published in Dawn, July 23rd, 2022

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