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Pakistan issues tender for LNG cargoes to meet winter demand

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1 year ago

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  • Delivery windows are December 7-8 and December 13-14: PLL.
  • Pakistan faces difficulty in procuring LNG amid Russia-Ukraine conflict. 
  • Natural gas supply dropped by 20% over the last year level.

LAHORE: Pakistan has issued a fresh tender to procure liquefied natural gas (LNG) spot cargoes to meet its winter demand after failing to secure supplies from the global market for over a year, The News reported on Thursday.

The Pakistan LNG Limited (PLL), a state-owned company, said on Wednesday it was seeking bids from international suppliers for two LNG cargoes of 140,000 cubic meters each, to be delivered in December at Port Qasim in Karachi.

The delivery windows are December 7-8 and December 13-14, according to the tender document. 

PLL has the mandate to procure LNG on behalf of the federal government to meet the country’s gas requirements through two LNG import terminals with exclusive arrangements for public sector distribution.

The delivery from the volatile spot market has been an uphill task for Pakistan since the start of the war between Ukraine and Russia in February 2022. 

Previous attempts to buy LNG proved futile mainly due to the lukewarm response of sellers. The growing concern of suppliers about the country’s credit risk has been another headache for a country already plagued by chronic energy shortages.

LNG is crucial for Pakistan, where natural gas accounts for over a third of power generation and local gas reserves are insufficient to address growing electricity demand in a country of over 230 million.

In late July this year, PLL failed in its attempt to purchase LNG too after several such attempts made earlier. A bidding company offered winter LNG cargoes at a premium of as high as 30% of the market price. Hence, PLL decided not to purchase the costly gas cargo due to the extremely high cost.

Last week, responding to a query raised by The News, Energy Minister Muhammad Ali said the natural gas supply in the system had dropped by 20% over the last year level. 

He said this was a huge gap, which would ultimately translate into low gas availability for the end consumers.

“The dwindling gas resources simply mean load shedding for the users,” he said, adding that imports of LNG could lead to bridging the gap, although it is a costly option. 

“We are trying to import as much LNG as possible.” However, the spot rate of LNG presently stands at $15 per unit, and Pakistan is selling it to domestic consumers at $1.5 per unit, which is not sustainable.

To meet the demand of the industry, the minister said the government is trying to import maximum cargoes of LNG. 

Responding to a query about the challenges in the import of LNG from the spot market and how to tackle them, minister Ali said Pakistan is facing two challenges on the import front. 

He said the first is the peculiar nature of the LNG trade where the purchase contract is made before the LNG is produced. 

One way to address this challenge, Ali said, is to have long-term buying contracts to ensure smooth gas imports. 

He said the other way is to try to get gas through government-to-government (G2G) arrangements. Besides having gas supplies under long-term contracts, “Pakistan is negotiating to import cargoes through G2G basis to meet winter demand.”

Talking about LNG spot purchases, he recalled that Pakistan did not get any response in June tendering amid high spot rates. 

“We are now contemplating to invite fresh bids for spot buying to ease winter demand. We are trying to minimise gas shortage in days to come.”

Moreover, talking about the second constraint in the import of LNG, which is the low capacity of gas import infrastructure, the minister said that his government wants to run both existing terminals at full capacity. They are also trying to remove hurdles in setting up more LNG terminals in the country.

One of the new terminals should have been established last year, but it was delayed due to litigation. If the third terminal is to be installed, the minister said they want to give a go-ahead to its construction within the tenure of the caretaker government.

According to a report, Pakistan’s liquefied natural gas demand will nearly triple in five years as its production of domestic gas dwindles. 

The South Asian nation will need 25 cargoes of the super-chilled fuel a month by then, from nine a month now. Pakistan has struggled to secure enough LNG to cover its needs after prices surged to an all-time high last year.

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Dar chairs the CCOP meeting; Blue World’s bid offer of Rs.10 billion is rejected.

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The Foreign Minister/Deputy Prime Minister chaired the Cabinet Committee on Privatization meeting.

Other committee members who attended the conference included the Federal Secretaries of several Divisions, the Ministers of Finance and Revenue, Industry and Food, Commerce, Power, and Privatization.

The CCOP took the PC Board’s recommendation into consideration and suggested that Blue World’s bid of 10 billion rupees for the sale of 60% of PIACL’s shares be rejected. The bid was rejected by the CCOP, who chose to follow the PC Board’s advice.

The government’s determination to sell out PIACL through government-to-government or privatization was reaffirmed by the CCOP.

The CCOP was pleased with the Aviation Division’s evaluation of PIACL’s sound financial standing.

Additionally, the CCOP established a committee, chaired by the Minister of State for Finance, to assess potential transaction possibilities for the privatization of the Roosevelt Hotel and the appropriate modes of adoption in light of existing legal rules.

Prior to its subsequent meeting, the CCOP also ordered that all difficulties be resolved and an agreement for the selling of services to an international hotel be concluded.

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The KSE-100 Index has surged by 790 points, resulting in an all-time peak for the stock exchange.

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The benchmark KSE-100 Index increased by 790 points, marking a new all-time high for the Pakistan Stock Exchange (PSX) at 94,982 points.

The record-breaking performance underscores a surge of optimism and investor confidence in the stock market.

As investors responded to favorable economic signals, the market experienced a significant increase of over 500 points in early trading. Later, the KSE-100 Index reached another record level of 94,786 points after adding 594 points to its upward trajectory.

This positive development comes as the State Bank of Pakistan’s (SBP) foreign exchange reserves saw an increase of $84 million, reaching $11.26 billion during the week ending November 8, according to data released by the central bank on Thursday.

This represents an increase of 0.75% from the previous week. In addition, the nation’s total liquid foreign reserves experienced a modest increase, increasing by $33.7 million or 0.21% week-on-week to $15.97 billion.

In contrast, commercial banks’ reserves experienced a decline of $50.3 million or 1.06%, ultimately settling at $4.71 billion.

Furthermore, the economic team of Pakistan has expressed confidence in the discussions with the International Monetary Fund (IMF). Minister of State for Finance Ali Pervaiz Malik, in an exclusive conversation with Samaa TV, claimed talks were moving in a positive direction.

Highlighting improvements in Pakistan’s economic conditions, Malik noted substantial progress over the past six months to a year. He emphasized that Pakistan’s current economic situation has seen significant enhancement, with a reduced current account deficit of only $100 million in the first quarter, a reflection of the government’s strategy to increase remittances and boost exports.

Malik shared that discussions with the IMF are primarily focused on external financing, and while there have been speculations about a potential mini-budget or an increase in the petroleum levy, he clarified that these are currently premature considerations.

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Positive IMF negotiations propel KSE-100 Index above 94,000 points

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As a result of investors’ optimism about the reported progress in the continuing talks with the International Monetary Fund (IMF), the Pakistan Stock Exchange (PSX) experienced a robust surge.

The benchmark KSE-100 Index of the PSX, which tracks market sentiment, rose 713 points to a new record high of 94,068 points, breaking above the 94,000-point barrier, as the trading session began.

Early in the day, the stock market began its upward trajectory as the KSE-100 Index steadily rose, gaining 574 points to reach 93,932 points. A possible agreement with the International Monetary Fund (IMF) might lead to more fiscal stability and back Pakistan’s economic reforms, which is why investors are so optimistic about the country’s future.

Officials from the Federal Board of Revenue (FBR) informed the International Monetary Fund (IMF) on Wednesday that the government would not be introducing a mini-budget and would instead continue to aim to collect Rs12,970 billion in taxes each year.

In line with continuing discussions with the Fund, FBR sources revealed that petroleum goods will not be subject to the General Sales Tax (GST).

The fact that Pakistan’s tax-to-GDP ratio has increased from 8.8% to 10.3%, a 1.5% gain viewed as a favorable sign of Pakistan’s fiscal policies, has reportedly pleased the IMF, who has voiced satisfaction at Pakistan’s recent economic performance.

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