Pakistan seeks six-year LNG contract amid severe shortage in int’l market

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Amid severe LNG shortfall in the international market, Pakistan has issued a two-part tender seeking bid prices from well-reputed international LNG trading companies for a six-year agreement.

Since the five-year LNG term agreement with GUNVOR expired in July 2022, the country’s fully-owned company Pakistan LNG Limited (PLL) has now released the tender for a term agreement for six years. Bids are invited from reputed international LNG suppliers for term cargoes on a delivered ex-ship (DES) basis at Port Qasim, Karachi.

In case Pakistan gets the best price bid, it will purchase 72 LNG cargoes in six years, meaning one cargo having LNG quantity of 140,000m3 every month, The News reported.

According to a top official at the Energy Ministry, PLL has issued a two-part tender. Under the first part of the tender, bids are invited for only one year i.e. 2023 starting from December 2022 to December 2023 under which 12 LNG cargoes will be delivered to Pakistan, one cargo a month. Under part two, Pakistan will seek 60 LNG cargoes for 5 years starting from January 2024 to December 2028 — one cargo every month.

Bidders will be bound to submit their bid prices for both parts of the term tender. However, Pakistan will have two options, to either accept both bids for one year and 5-year contracts or bid for the second part only for 5-year agreement depending upon the response from bidders. However, Pakistan will not accept bids for a one-year agreement alone.

Energy experts say it is not an appropriate time to issue the term tender arguing that the EU, USA, and Japan imposed sanctions on Moscow after Russia invaded Ukraine and the LNG producing countries and LNG trading companies are over-committed with European countries. They may have no space to make contracts with a country like Pakistan whose economic situation is too volatile and LCs confirmation charges are very high.

However, official sources say that Argentina, which has a worse economy than Pakistan, has recently managed to ink a term agreement at 15% of the Brent on a prepaid basis. “So we are hopeful that LNG trading companies will reasonably turn up with their bid prices for two parts of the tender.”

Currently, Pakistan is relying on LNG cargoes under long-terms agreements. It is getting 6 cargoes per month from Qatar under a 15-year agreement at 13.37% of the Brent, 2 cargoes again from Qatar under a 10-year contract at 10.2% of the Brent, and one cargo under a 15-year agreement from ENI at 12.14 of the Brent.

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