Friday, May 24, 2024

LNG Tender default benefits Pakistan

The LNG- liquefied natural gas supply defaults recently as in last week by the two major companies of foreign state, SOCAR and Enoc. However, these came as a boon and became a blessing in disguise for Pakistan as the two urgent tender’s replacement for the month of, February fetched at around 16% to 18% cheaper in rates as in the international market.

This urgent tender was floated by the state-run of the PLL- Pakistan LNG Limited for the second half of the next month that is attracted to the lowest bid for $ 9.58 per MMBTU British thermal unit or to 19.5pc of the Brent in between February 21 to 22 by the window from a Vitol Trading.

The lowest bids in comparison from the defaulting parties for same period were around $ 11.48 per million MBTU or the 23.41pc of a Brent from February 15 to 16 by the SOCAR of the country of Azerbaijan.

PLL’s informed resources said that the SOCAR has not only defaulted on its bid of February; however, it has tried to blackmail also to the PLL into the committing for about 11 cargos from between the months of February to September at the higher rates than market under the G2G- government-to-government arrangements without the bidding.

Documents that were seen by the Dawn show SOCAR and PLL that it remained engaged in the talks until the very last moment; however, the requirement for this cabinet’s approval for the G2G deal just end up the whole process.

The prices had gone down fortunately in the market by this time PLL floated their urgent tenders. The two main contributing factors to the crash market of LNG included intervention by energy regulator of the Japan to exit their spot market in a quick attempt just to ensure that the power prices of it do not purely go up for further amid weather conditions as if even warmer.

Moreover, the South Koreans decided also to go against securing the additional gas for the month of February.

As a result the hoarding of the LNG trader’s product had to offload the cargoes, as a fall in the spot market. At the present time Far Eastern and the European traders are paying for about $ 7.5 and the $ 8.2 per MMBTU. The market analysts also expect that the LNG prices will further go down in the next year from April onwards until the month of October.

Petroleum division that had seldom just announces that the results of the PLL bid claimed the credit for lower prices. And in a recent statement, it was said that the PLL has also arranged one or more of the LNG cargo at even lower price for the upcoming month of February, of this year, 2021 by an urgent tender. Moreover, the price of it is approximately to 22pc lower than price of the bidder which withdrew its bid as in earlier for the same cargo.

It was also established by the episode that it is a fact that traders don’t own any cargoes, and don’t care about the reputational damage; hence choose to default on the Pakistani tender they were also making profit of around $ 15 to $20 million per cargo that was against the paltry loss of about $300,000 security bonds. In this process Pakistan is however, estimated to even have got a huge saving of around $ 7 Million to $10 Million per cargo while comparing to the 2 lost cargoes.

The PLL interestingly has received some bids for the month of March 2 to 23 delivery window just at a rate between the values of $17 to $23.75 per cargo. However, all the spot cargos that contain about 140,000 cubic meters of the LNG or even 3.2 million MMBTU will be available.

Mehjabeen Qasim
Mehjabeen Qasim
Business Journalist at Startup Pakistan

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