What could well turn out to be the last bid received for LNG spot tenders under this government, bids offered at $34.7 and $33.5/mmbtu, will go down as the highest ever received. Needless to say, the bids at such exuberant rates will not be entertained. This is fivefold higher than the cargoes secured from the spot market in the same period last year. That is how wildly has the international gas market behaved in the last few months.
Recall that Pakistan has also struggled to secure shipments from its long-term suppliers, who have more -than once, excused from honoring the commitments. Several cargoes under the long-term supply contract, scheduled for delivery for the next four months, have been cancelled. To make matters more difficult, the spot rates on offer make it exceedingly difficult for Pakistan to purchase spot cargoes.
In the larger scheme across the globe, Europe is the center of attention once again. In the light of sanctions on Russia, Western countries and even some of the bigger buyers in Asia Pacific have refused to engage with Russia for gas imports. Japan, the world’s largest LNG importer has gone on to the extent of offering LNG tenders with specific ban on Russian supply.
Europe is believed to be queuing up for spot LNG cargoes at whatever rates in substantial quantity. If news reports are to be believed, European countries have demanded as much LNG from the spot market, as the entire South Korean imports, which makes up for 10 percent of global LNG trade. It goes without saying, with such high demand and curtailed supply from Russia – there is little respite in prices on offer.
The cargoes arranged from Qatar on long-term basis are expected to be priced north of $20/mmbtu for most of Q4FY22, as Brent crude oil prices have refused to cool down. It remains to be seen what becomes of Pakistan’s plans of implementing Weighted Average Cost of Gas (WACOG). With the government on it way out, save miracle, expect more indecision on this front. The natural gas prices are also due a revision, as the regulator has approved revised determinations for both Sui companies. The best time to do it was yesterday. Tomorrow will still work. Never Is not an option, but it increasingly looks to be moving that way.