Delay in the signing of floating tenders for LNG import by Pakistan LNG Ltd (PLL) caused losses of Rs. 10.6 billion in the financial year 2020-21, revealed the audit report of Petroleum Division and the Oil and Gas Regulatory Authority (OGRA) for the audit year 2020-21.
The delay in awarding the LNG contracts caused prices to go higher, thereby increasing the cost of imported LNG, which led to the recent gas shortage in the country.
The audit report held the PLL responsible for the shortage and higher costs due to their poor planning for the procurement of spot LNG cargoes.
The audit also noted that the PLL management floated tenders of six cargoes from January 8 to February 1 against a demand raised by the Sui Northern Gas Pipeline Limited (SNGPL). However, even though the petroleum company had opened the tender on December 10, 2020, no supplier bid was received for three slots between January 20 and February 1.
The report further noted that the PLL issued tenders for the unfilled spots by invoking the emergency clause of PP Rules. However, this time the bids received were at record high prices. The audit report held the PLL responsible for the incurred losses as the SNGPL had timely apprised the PLL of the demand for LNG.
The delay caused in awarding the contracts resulted in Pakistan paying higher prices and the delivery slots remaining unfilled, which led to a shortage in the country. These factors caused a loss of Rs. 1.3 billion.
The audit reported that the same situation occurred in the months of November and December last year when the PLL awarded contracts at $6.78 per MMBtu in November 2020 for delivery in December. These tenders could also have been issued earlier in June as the prices at that time were around $4.38 per MMBtu. This also led to a cumulative loss of Rs. 7.7 billion.
The report revealed that PLL management failed to make timely arrangements for LNG procurements, despite knowing historical consumption trends in winters and respective price changes in the international market.