Pakistan Receives One of The Costliest Bids Ever for February’s LNG Procurement.

Pakistan received bids from five liquefied natural gas (LNG) companies for two cargoes in February 2021, at the highest price as yet. Pakistan LNG Limited (PLL) received these all-time highest bids up to 32.48 percent of Brent. The lowest bids for the delivery windows of February 2021 were nearly at 21 percent to 23 percent of Brent, as received by the PLL.

However, as a result of this delay in the process by the government, Pakistan has to purchase the costliest liquefied natural gas (LNG) in February 2021, at 32.48 percent of Brent, with a 31-day gap between tender opening and advertisement. PLL invited bids from international suppliers for the supply in February 2021 of two LNG cargoes on a delivered ex-ship (DES) basis at Port Qasim, Karachi, through an advertisement dated November 28, 2020.

Earlier, in January, Qatar Petroleum had emerged for the first time and offered the lowest bids of up to over 17 percent of Brent. This lowest bid was still at a higher cost than the cost of purchasing the same LNG a few months earlier. This ended up forcing Pakistan to buy the cargoes at a higher price. It may be important to note here that even with this rate, Qatar Petroleum outpaces the LNG trading companies by a big margin.

Trafigura offered bids for the two slots of February 15-16 at 32.4888 percent of Brent, and for February 23-24 at 25.9777 percent of Brent. It is the same company that was willing to convert Pakistan Muslim League-Nawaz’s (PML-N) LNG contracts to a fixed rate between $3.7 and $4.7. However, now the company has offered its lowest bid at 32 percent, which is about twice the long-term price obtained by PML-N.

The Ministry of Energy (Petroleum Division) has also issued a press release on the issue of expensive LNG, saying, “Comparison between LNG spot price in a high winter month and a long-term contract is irrational.”

The statement gave the following justification:

This is concerning comments in a certain section of media about two spot cargo bids received by PLL for deliveries in the second half of February 2021. The Spokesperson said that the spot market for LNG is always higher in the winter months versus summer months, given the global demand and supply dynamics. Comparing a spot price in a high winter month with a long-term contract is comparing apples and oranges.

If the same comparison is made for a summer month, it will be much lesser. If a comparison is to be made, it can be made for a full year that includes all seasons. In 2020, all the spot cargoes purchased by Pakistan averaged $6.84 DES (Delivered Ex Ship), including all the higher cost winter cargoes in January, February, November, and December 2020. In the same year, all the cargoes received under long term contracts averaged $8.06 DES, a full 18 percent higher.

Credit To : ProPakistani

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