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muhammadhafeezmalik

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  • Nation’s gamble that spot prices would fall fails to pay off
  • Global supply crunch has boosted rates from Europe to the U.S.


Cash-strapped Pakistan’s bet that liquefied natural gas prices would go down has failed, forcing the South Asian nation to pay more than ever for the power plant fuel or risk blackouts.

Pakistan LNG this week bought four cargoes for September delivery at around $15 per million British thermal units, the highest since the nation began imports in 2015, according to people with knowledge of the matter. The importer scrapped a tender for September cargoes that closed earlier this month in a gamble that prices would fall.



Officials said the government entities had been compelled to purchase expensive LNG from spot market over the last couple of months and had to even cancel a series of bids for being too expensive. Interestingly, the two government entities — Pakistan LNG Ltd (PLL) and Pakistan State Oil (PSO) — involved in LNG imports are keeping the bid results totally secret to avoid public criticism.


As a result, only final weighted average sale price for a month computed by the Oil & Gas Regulatory Authority (Ogra) is made public. However, the expensive spot bids are currently camouflaged because of cheaper long-term supply contracts from Qatar. Interestingly, Ogra is not authorised to question the prudent cost of imports and is compelled to only compute the weighted average LNG price of 10-12 vessels per month.


This was also evident from the fact that a bid at the rate of $11.66 was cancelled by PLL for delivery and was purchased from the same bidder for the same dates a couple of days later for $12.77 — a difference of $1.11 per unit for about 140,000 cubic metre. Even before this, the weighted average sale price for July at $12.92 per mmBtu made public by Ogra a few days ago showed a 25pc increase over average LNG price of $10.33 per mmBtu in June.



Bids for four spot LNG deliveries in September range between $15.2 and $15.5 per mmBtu
The bids for four spot LNG deliveries in September accepted by the PLL ranged between $15.2 to $15.5 per mmBtu — perhaps the highest since the beginning of LNG imports in 2015. Interestingly, about 8 bids for September and October were cancelled including those at $13.79 to $13.99 per mmBtu from Qatar as some other bids touched $16 and a single bid for PSO came in at $20 per mmBtu.


A senior official said the government was expecting better result through the revised round of bidding as prices in the Asian Spot LNG market had fallen below $12 per mmBtu. But these uncertainties were resulting in fuel management issues and leading to electricity shortfalls.


The electricity consumers and CNG operators become the ultimate losers — in the form of higher power tariff and CNG getting uncompetitive against petrol, respectively. The gas companies also suffer through increase in circular debt that may get close to Rs200bn by end of the year from about Rs130bn in June this year.


Expansion of existing LNG terminals opposed

Amid rising number of unaffordable bids, the Petroleum Division has opposed capacity enhancement of existing terminals of liquefied natural gas saying it would lead to competition barrier and create private monopoly.


“Allowing Terminal-1 (of Engro Elengy) to expand existing terminal capacity may create the competition barrier and discourage the market for investing in new LNG terminals and infrastructure as there is limited pipeline capacity available for Gas Transport Agreement,” warned Directorate General of Liquid Gases (DGLGs) — a dedicated expert arm of the Petroleum Division.


In an advisory note to the policy makers, the DGLGs reported that Terminal-1’s storage capacity was 148,724 cubic metres and guaranteed regasification capacity of 630 mmcfd (4.5 MTPA — million tonnes per annum). As per expansion plan, Engro wanted to increase the base load capacity of the Floating Storage & Regasification Unit (FSRU) to about 780 mmcfd with peaking of up to 960 mmcfd and storage capacity of about 170,000 cubic metres. “Internationally, a FSRU with about 150,000 cubic metres storage capacity is usually designed for throughput of around 3MTPA of LNG to have some operational flexibility for smooth operations,” it said.


The DGLGs put on record that the Government of Pakistan (GoP) had established the Engro terminal and related LNG import infrastructure and booked its entire capacity at its own risk. Arrangements were finalised on Fixed Term and Fixed Capacity Charges and the Engro terminal tariff included the cost of entire LNG infrastructure including the jetty, not just FSRU.


“By simply replacing the FSRU with a larger one, the operator will get excessive returns on the back of the risks entirely undertaken by the GoP for setting up the country’s first LNG import terminal,” the note said.


It said Excelerate Energy of USA had already acquired an asset parked in Pakistan in the form of FSRU for a period of 15 years and replacing an FSRU after six years was no additional investment. “Economic benefit of initial investment is still pending for next 9 years as investment was made for 15 years, hence, its replacement is not an additional investment,” it said.


It also warned that a investigation by National Accountability Bureau (NAB) with regards to alleged illegal award of LNG Terminal-1 contract to Engro was under process and made the process of expansion and third-party access to Terminal-1 uncertain while the Federal Cabinet in its decision had set precedence by unambiguously directing to withhold any negotiations with LNG terminal owners till conclusion of NAB inquiry.


The DGLGs said the expansion to EETPL terminal would require major amendment in LNG supply agreement (LSA) and its ancillary agreements. Since these agreements have already been submitted to the offices of NAB in wake of ongoing NAB investigation, therefore reopening them or entering into new contractual arrangement involving Terminal-1 would only invite the attention of NAB towards an already controversial issue and may be termed as an illegal activity.


Also, all arrangements related to terminal-1 were compliant with procurement rules. Therefore, any modification in this structure will be in violation of the said rules and could attract legal complications and transparency issue. Unlike merchant terminal, where multiple users can bring in their LNG and regasify at the terminal, EETPL terminal is a Government dedicated terminal whose entire capacity is booked by SSGC.

 
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Norwegian

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muhammadhafeezmalik

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Same way your Khoti Pmln functioned after causing 20 billion dollars current account deficit View attachment 766247

By not buying LNG from your Patwari Qataris?

Spot is cheaper long term but Patwaris won't understand this
This is not about the spot vs Agreement, this is about unprofessional behavior. Your so caaled SADIQ & AMEEN government rejected a vessel on $11/mmbtu and bought after four days from the same party at $13/mmbtu, again for September-October rejected bids for $13.79 to $13.99 per mmBtu from Qatar but approved days after rejection at $15.2 to $15.5 per mmBtu from same Patwari Qataris.

Who would bear extra cost of this non-professional behavior of your so caaled SADIQ & AMEEN government??
 

Norwegian

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This is not about the spot vs Agreement, this is about unprofessional behavior. Your so caaled SADIQ & AMEEN government rejected a vessel on $11/mmbtu and bought after four days from the same party at $13/mmbtu, again for September-October rejected bids for $13.79 to $13.99 per mmBtu from Qatar but approved days after rejection at $15.2 to $15.5 per mmBtu from same Patwari Qataris.

Who would bear extra cost of this non-professional behavior of your so caaled SADIQ & AMEEN government??
Govt was delaying the purchase in anticipation of getting lower price later on. This bet failed as demand outpaced supply in international market. Are you gonna blame the govt for market forces?
 

farok84

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Petroleum Ministry done the same mistake it has committed in July, but Pakistan lost millions of USDs on both occasions but no one is taking responsibility, how this government is functioning??
Hi,

It is an unfair characterization. They took a gamble and it didn't work, there was always risk attached to it. They cancelled the tender when the prices started to fall, it was a bold move. However, they got lower prices for the first two windows (C1 & C2), and got higher for the last two (C2 & C4). Attached are the results for both tenders.

1627637654064.png


1627638959051.png


It will cost us extra $6 million but if things could have gone our way like the way it happened in Feb, we could have also saved much more. The decision wasn't a mistake, its the nature of spot business.

We actually had a discussion on this a few weeks ago on another thread.



A new tender has been issued for October and November (7 cargoes) by PLL, while PSO is also seeking two more cargoes for September delivery.


For a better understanding, this is latest tweet from the writer of that Bloomberg report.

 

muhammadhafeezmalik

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farok84

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Nobody. It's spot price. Govt cannot control it
Hi,

He should leave this to Tabish Gohar or Hammad Azhar or atleast ask them for correct prices. Pmln contract with Qatar was at 13.37% and not at 13.7%.
I am asking a simple question "Why government cancelled earlier bids at lower price and bought at higher price from company after a few days at much higher prices for the third time in three months??" and instead answering this simple question you running from north to south.
Hi,

Please read the article you shared and you will have your answer.
 

Norwegian

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I am asking a simple question "Why government cancelled earlier bids at lower price and bought at higher price from company after a few days at much higher prices for the third time in three months??" and instead answering this simple question you running from north to south.
Here is your answer Patwari. It's a complicated business, way above your IQ
Hi,

It is an unfair characterization. They took a gamble and it didn't work, there was always risk attached to it. They cancelled the tender when the prices started to fall, it was a bold move. However, they got lower prices for the first two windows (C1 & C2), and got higher for the last two (C2 & C4). Attached are the results for both tenders.

View attachment 766261

View attachment 766266

It will cost us extra $6 million but if things could have gone our way like the way it happened in Feb, we could have also saved much more. The decision wasn't a mistake, its the nature of spot business.

We actually had a discussion on this a few weeks ago on another thread.



A new tender has been issued for October and November (7 cargoes) by PLL, while PSO is also seeking two more cargoes for September delivery.


For a better understanding, this is latest tweet from the writer of that Bloomberg report.

 

muhammadhafeezmalik

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Hi,

It is an unfair characterization. They took a gamble and it didn't work, there was always risk attached to it. They cancelled the tender when the prices started to fall, it was a bold move. However, they got lower prices for the first two windows (C1 & C2), and got higher for the last two (C2 & C4). Attached are the results for both tenders.

View attachment 766261

View attachment 766266

It will cost us extra $6 million but if things could have gone our way like the way it happened in Feb, we could have also saved much more. The decision wasn't a mistake, its the nature of spot business.

We actually had a discussion on this a few weeks ago on another thread.



A new tender has been issued for October and November (7 cargoes) by PLL, while PSO is also seeking two more cargoes for September delivery.


For a better understanding, this is latest tweet from the writer of that Bloomberg report.

The article says that Pakistan gambled on prices and lost.
 

farok84

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Both screen shots are for the same bid the first one comparative statement is computed by ministry the second one is raw screen-shot.
Hi,

The first one was published on 6th July, the other yesterday.

The article says that Pakistan gambled on prices and lost.
And that should have answered your question. For more clarity, read below quote from the article you shared.

A senior official said the government was expecting better result through the revised round of bidding as prices in the Asian Spot LNG market had fallen below $12 per mmBtu.
For further clarity, read discussion here.

 

Xone

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Pakistan got the best inefficient government of its entire history and you are still blaming it for the incompetency of doing anything. it is the most favorite one of the U-turns, who cares? it is here to rule and ruin the country completely.
it is the love of our selectors, why? our PM is a handsome-looking hero. Right? The question is how long they will take to learn?
 

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