ISLAMABAD: In light of the anticipated worsening of the gas shortage in January 2024 due to the state-owned company SOCAR in Azerbaijan’s rejection to offer a distressed LNG cargo for the month, Pakistan has chosen to issue a tender this week to request bids from LNG trading companies for one spot LNG cargo that is needed for January.
According to media reports, an official from the Energy Ministry said that in the coming week, Pakistan LNG Limited (PLL) is set to release a tender inviting bid from LNG trading companies. The objective is to secure the delivery of a single LNG cargo, addressing the anticipated gas shortage and ensuring a continuous supply to the domestic sector, particularly during cooking hours, for 8 hours.
Referring to a prior case, the official revealed that the government had directed Pakistan LNG Limited (PLL) to procure a cargo based on the lowest bid received during the bidding process, provided it falls within the specified range. In such a scenario, PLL can approach SOCAR to present an offer lower than the lowest bid. However, if the lowest bid is outside PLL’s range, it retains the right to reject it.
The official highlighted the recent bids for a December cargo, ranging from $18.3900 to $19.3900 per MMBtu, which were considered higher. Consequently, SOCAR offered the second cargo under the GtG agreement at a price below Vitol’s lowest bid of $15.95 per MMBtu. “We purchased one cargo from Vitol and the second from SOCAR.”
Regarding potential penalties if SOCAR fails to provide distressed cargo to Pakistan within a month, the official explained that the agreement with SOCAR is loosely defined. Pakistan cannot impose penalties if SOCAR does not offer cargo for a specific month. However, if an offer is made, Pakistan reserves the right to reject it if the terms are deemed unaffordable.
During the previous government’s tenure led by Shehbaz Sharif, a Gas-to-Gas (GtG) deal was established with Azerbaijani firm SOCAR, obliging them to supply one LNG cargo monthly. A one-year agreement was inked on July 25, 2023, extendable for another year. According to the agreement, SOCAR Trading Company-UK would submit an offer for one LNG cargo 45 days before the relevant delivery window, with a set validity period for PLL to accept.
Before the potential non-provision of an LNG cargo, the country was projected to face a gas shortfall of 360 million cubic feet per day (MMCFD) in December 2023, rising to 470 MMCFD in January 2024, despite restricting gas availability to the domestic sector for only 8 hours during cooking times.
Government estimates indicated a gas deficit of 160 MMCFD in December and 170 MMCFD in January for the Sui Southern System. In the Sui Northern System, the deficit was projected at 200 MMCFD in December and 300 MMCFD in January. The gas shortfall was anticipated to reach 360 MMCFD in December, escalating to 470 MMCFD in January, potentially worsening due to the non-availability of LNG cargo from SOCAR.