Pakistan gets costlier bids for seven LNG cargoes

ISLAMABAD: Pakistan LNG Limited (PLL) here on Tuesday received bids for seven LNG cargoes to be delivered in October-November period, ranging from $17.1447 to up to $25 per MMBTU. Out of the seven cargoes, PLL requires four LNG cargoes for the month of October and three for November.

Bids from three LNG trading companies, which include PetroChina International Singapore, Total Gas & Power and Vitol Bahrain, were technically declared qualified.|

The PLL issued the tender on July 24, 2021 seeking bids from international suppliers and trading companies for seven LNG cargoes for October-November. Every cargo will have 140,000 cubic meters.

PetroChina International Singapore submitted the highest bid of $25 per MMBTU for the cargo to be delivered on October 27-28 against the offer by Vitol Bahrain at $18.9966 per MMBTU for the same time slot.

The PLL says that no decision has been taken to either award the spot LNG contracts as the Board of Directors will take the decision within the time limit available under the PPRA rules. It says that it was a PPRA compliant tender.

Vitol Bahrain submitted lowest bids for five LNG cargoes in the range of $18.9966-22.5866 per MMBTU with its bid price at $22.5866 per MMBTU for the cargo to be delivered on October 7-8. It also came up with the offer price at $20.9466 per MMBTU for the cargo to be delivered on October 22-23 and for the cargo to be delivered on October 27-28. Vitol Bahrain appeared at a bid price of $18.9966. The same company also submitted its price at $19.6966 per MMBTU for cargo to be delivered on November 11-12 and $20.9266 per MMBTU for the cargo that is to be provided on November 26-27. Total Gas & Power submitted the two lowest bids, one with price at $17.1449 per MMBTU for the cargo to be delivered on October 17-18 and $17.53350 per MMBTU for the delivery window of November 16-17.

The official said that there is no doubt that the spot market is bullish and buoyant but PPRA rules are also causing further hike in the spot LNG prices. Under the PPRA rules, the period of keeping the bids validated from the date when prices are opened to the date of awarding of contract have increased from 10 to 15 days. This means that PLL cannot award the contract before 15 days. Earlier, 10 days for making bids intact were fixed and the period of 10-15 days is the main cause for hike in bids as suppliers add premium and cover the risks of fluctuation of LNG prices in the said period. In risk, dollar price variation also matters.

The State Bank of Pakistan (SBP) in its report has also already analyzed the PPRA rules meant to import the LNG through spot procurement saying that there is a 10 day period between price offering and awarding of contracts, which is why the bidders add premium to cover the risks happened in the said period, resulting into the bid prices at higher side. The SBP has recommended that for smoother operations and to ensure that imports are finalized at competitive rates, importers need to notify the terminals around three to four months in advance to secure the needed cargoes. In this regard, the PPRA procurement rules may also be revised to minimize the time between the invitation and opening of bids, and between result announcement and contract finalization. The report also asks for participation of the private sector in importing the LNG, arguing with private importers eventually coming into the market, further improvements would be witnessed on this front, provided that these players would not have to follow the PPRA regulations. It also mentioned that although the government has recently exempted PLL from the PPRA rules when securing spot purchases, these exemptions are time-bound, and would also not be sufficient to shorten the import process duration. The report also stressed that a more effective solution is needed to introduce sector-specific clauses within the PPRA rules for LNG imports. This would provide a legal cover to the importers, help reduce costs, and speed up supplies to the end-consumers on a sustainable basis.