Pakistan is Buying its Cheapest LNG Cargo Ever at a Record Low Price

Pakistan is set to buy the cheapest LNG cargo yet as it has secured a record low LNG price.

SOCAR Trading has placed its lowest offer to Pakistan LNG Ltd for a liquefied natural gas (LNG) cargo for delivery in late August.

According to the details shared by Pakistan LNG, SOCAR was the lowest bidder, which quoted a remarkable rate of *5.7395%* of Brent (approx. USD 2.2/mmbtu) for the cargo. Prices quoted by the other three bidders are Gunvor 7.8421%, PetroChina 8.3500%, Trafigura 10.3811%.

PLL received an offer for an Aug 27-28 delivery cargo at about $2.20/mmbtu. It is worth mentioning that Pakistan has been out of the spot market in 2020, and this is their first tender since November 2019.

A.A.H Soomro, managing director at Khadim Ali Shah Bukhari Securities told ProPakistani,

This is a game-changer! It’s time for Pakistan to relook at long term LNG contracts and move towards Spot purchase. Let’s assess the possibility of cancellation of the contracts. Bargain in your favor. This solves half of Pakistan’s problems if we speedify the LNG terminals. The economy would grow in leaps and bounds if we reduce energy costs now.

This is lower than the Asian LNG spot price LNG-AS for August which on Friday was estimated to be about $2.35 per mmBtu. The prices are expressed in the document as a “slope” of crude oil prices, a percentage of the Brent crude price, and are typically a pointer for the opaque spot LNG market.

Pakistan LNG has a separate tender to buy two LNG cargoes for delivery in September which closes on August 4.

Fitch Solutions stated that Asian spot LNG prices continue to hover at historical lows as COVID-19 continues to drag economic activity and demand.

The spot prices in Asia have remained depressed accordingly, falling by more than 50% since the start of the year to hit USD 2.5/mmBTU at the time of writing in July, from USD 4.0/mmBTU in January. YTD prices are shown to have averaged USD 2.7/mmBTU, halved from USD 5.4/ mmBTU in 2019 and less than a third of the USD 9.7/mmBTU averaged in 2018.

LNG imports into key importing markets in Asia – apart from China – have registered large y-o-y declines across the board as gas consumption across industry and commercial sectors slowed to a crawl as strict COVID-19 containment measures were observed.

The outlook for LNG prices was hardly rosy coming into the year even before the onset of the coronavirus pandemic, amid a negative backdrop of slowing coal-to-gas switching in China and a milder winter, although it looks to have deteriorated further as energy demand sinks across the region.

Source: Fitch Solutions

 

Pakistan’s Net LNG Imports

Source: Fitch Solutions



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