Pakistan undecided on lone pricey bid for LNG

Published July 15, 2023
A liquefied natural gas (LNG) tanker is tugged towards a thermal power station in Futtsu, east of Tokyo, Japan. — Reuters/File
A liquefied natural gas (LNG) tanker is tugged towards a thermal power station in Futtsu, east of Tokyo, Japan. — Reuters/File

ISLAMABAD: Pakistan’s another bid to test the international spot market for additional Liquefied Natural Gas (LNG) supplies in peak winter appeared to be a non-starter when only a lone bidder turned up with offers at a significant premium making the price unviable for local consumers.

However, the offered price may provide a window for Azerbaijan’s state-run Socar Trading to come forward provided it secures a cheaper cargo.

This would also put to test the G2G supply contract signed with Socar because the tender has at least resulted in a price discovery from the comparable spot market bids to determine the reasonability of the bilateral price.

In an international tender on June 13, the state-run Pakistan LNG Ltd (PLL) sought bids for the procurement of three LNG cargoes for delivery in the first and last week of January 2024 and the fourth week of February with a bidding deadline set at noon (12:00 hours) on Friday (July 14).

In response, only one trader – Trafigura Pte Ltd – came up with two bids against January 3-4 window and February 23-24 window.

PLL struggling to secure cargoes to bridge winter energy shortages

The bidder offered a delivered price of $23.47 per million British thermal unit (mmBtu) for January 3-4 delivery window and $22.47 per mmBtu for February 23-24. There was no bid for Jan 28-29. Both bids are about 26-29pc higher than prevailing prices in the LNG spot market.

The bid evaluation committee of the PLL has termed the two bids technically qualified and the lowest evaluated given no other bidder turned up. The decision would be taken shortly by the PLL’s board of directors.

The PLL had decided last month after a year-long break to re-enter the LNG spot market and had floated two tenders on June 13. The first tender with a bidding deadline of June 20 had received no bid against tender for six cargo deliveries in October and December this year.

The second tender issued the same day (June 13) pertained to three cargos in January and February of next year with a bid closing date of July 14.

The LNG supplies in the spot market had eased in recent months with significant price drops to pre-Ukraine war level that prompted PLL to test the waters for its winter energy gas shortage.

However, those dealing with energy supplies said Pakistan’s adverse credit rating amid foreign exchange limitations and Europe’s winter energy requirements kept the LNG traders at bay as the 245 million nation had been struggling to line up letters of credit for necessary imports.

PLL used to import up to three cargoes a month through spot tendering to meet seasonal demands but has been facing serious difficulties in securing even a single cargo since June 2022 when its repeated tenders failed to attract any bidders.

Published in Dawn, July 15th, 2023

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