Monday, September 25, 2023

PLL gets expensive offers for LNG cargoes

Pakistan received highly expensive offers to deliver seven Liquefied Natural Gas (LNG) cargo in October and November in yet another round of spot bidding, which may have to be rejected by the board of directors of state-owned Pakistan LNG Ltd. (PLL).

PLL launched bids and three bidders were technically eligible for seven LNG shipments between October 7th and November 27th. They submitted a total of ten bids, with PetroChina submitting one, Total Gas & Power submitting two and Vitol Bahrain submitting seven. PetroChina offered the highest bid of $25 per unit for the October 27-28 delivery window.

According to informed sources, the PLL would have to go through a second round of bidding on short notice, as it had done in the past and was able to secure cheaper pricing a few months ago.

According to these sources, these bids were sought under procurement regulations that mandated a 30-day notice and a 15-day bid validity period. Not only were there fewer proposals, but the bid rates were higher as no bidder could retain the vessel for such a long period or charge a premium.

According to insiders, the PLL was pressing on the total exemption from procurement norms for LNG imports, as other nations, notably India, have done to align with LNG spot market dynamics.

Total was ranked the lowest-rated bidder for both bids at $17.1449 per million British thermal units (mmBtu) for October 17-18 delivery and $17,5350 per mmBtu for October 16-delivery November 17th.

Vitol Bahrain was deemed the lowest assessed bidder for the five additional cargoes, even though all of these were single bids. Its bid prices ranged from $19 to $22.58 per mmBtu. Vitol bid $22.5866 per unit for Oct 7-8 cargo, $20.9466 for Oct 22-23, $18.9966 for Oct 27-28, $19.6966 per unit for Nov 11-12, and $20.9266 for Nov 26-27 delivery window.

According to a power industry analyst, PLL’s LNG offers were not viable for power production since they were nearly comparable to 25-30% of Brent, and beyond 17-18% of Brent, furnace oil becomes competitive for power generation. He stated that spot markets have lately dipped significantly when Russia hinted at boosting gas supply to Europe, but this may not be achievable until January, causing LNG prices to rise again.

LNG prices are typically higher in the winter but have reached new highs in the summer due to supply limitations in the worldwide market.

However, Pakistan’s average LNG costs may fall as a result of the second LNG import contract with Qatar, which is set to go into effect in January this year at about 11 percent of Brent, in addition to the old initial deal with Qatar at $13.37 percent of Brent. This would bring the entire supply under long-term contracts to around 70-75 percent of the current terminal capacity, leaving lesser volumes to the whims of the volatile spot market.

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