PSO books costliest LNG cargo for September

ISLAMABAD: Making a new record, state-run Pakistan State Oil (PSO) on Tuesday awarded a liquefied natural gas (LNG) cargo to commodity trader Vitol at 24.5456pc of Brent (about $17.86 per mmBtu) – the most expensive so far – for delivery on Sept 26-27.

“PSO has decided to award the below mentioned cargo for supply of LNG,” PSO announced on its website. Vitol was the single bidder for the Sept 26-27 cargo. Earlier, PSO had rejected slightly higher bid of 27.54pc of Brent by the same single bidder for delivery on Sept 24.

The previous record of the highest LNG price was that of $15.93 per unit (22.13pc of Brent) from Qatar Petroleum for Aug 29-30 delivery.

On Aug 24, another state-run firm Pakistan LNG Ltd (PLL) had also received very expensive bids for seven LNG cargoes for October and November ranging $17.1449 and $22.6 per mmBtu. PLL has not yet awarded contract for any of the cargoes, bids for which are still valid until next week, and has gone into emergency re-bidding for five cargoes.

In a written comment to media, PSO had confirmed last month that the cargo for Aug 29-30 at $15.93, or 22.13pc, was the most expensive so far. “The highest slope PSO has paid was in February 2016 which was 18.93pc of Brent,” a company spokesperson said.

PLL is now sought fresh bids for five cargoes with delivery targets on Oct 8, 23 and 28 besides Nov 6 and 12. All these were single bids from Vitol Bahrain. Its bid rates ranged between $19 and $22.58 per mmBtu. To be precise, Vitol bid for Oct 7-8 cargo at $22.5866 per unit, $20.9466 for Oct 22-23, $18.9966 for Oct 27-28, $19.6966 per unit Nov 11-12 and $20.9266 for Nov 26-27 delivery window.

Although, it has not yet awarded two other cargoes but re-bidding for five cargoes meant the PLL authorities had made up mind to accept two bids for delivery on Oct 17 and Nov 16. Total was rated lowest evaluated bidder for its both bids at the rate of $17.1449 per mmBtu for delivery on Oct 17-18 and $17.5350 per mmBtu for Nov 16-17 delivery window.

The bids for four spot LNG deliveries in September accepted by the PLL ranged between $15.2 to $15.5 per mmBtu and at the time were the highest since the beginning of LNG imports in 2015.

A power sector expert said at LNG price beyond 17-18pc of Brent, furnace oil becomes competitive for power generation. He said spot markets had recently dropped slightly after Russia hinted at increasing gas supplies to Europe but later noted it may not be possible before January, hiking LNG prices again.

Pakistan’s average LNG prices may, however, become lower on the back of second LNG import deal with Qatar that has to formally operationalise in December this year at about 10.3pc of Brent coupled with old first deal of $13.37pc of Brent with Qatar. This would take the overall supplies under long-term deals to about 70-75pc of total existing terminal capacity, leaving smaller quantities to the vagaries of unpredictable spot market.