GUNVOR, a Singapore-based LNG trading company, has refused to deliver four Liquefied Natural Gas (LNG) cargoes to Pakistan in the next three months, reported S&P Global Commodity Insights.
Energy Ministry officials told the energy benchmarks rating agency that the commodity trader had issued refusal notices to Pakistan, compelling the South Asian country to acquire LNG on the spot market at record-high rates amid tricky energy security concerns.
The Ministry of Energy got refusal notices from GUNVOR on March 26 which stated that the trader would be unable to ship four LNG cargoes scheduled for delivery on April 15, May 14, June 4, and June 9 as per contracts.
GUNVOR has already failed on three occasions and backed out of providing LNG cargoes for scheduled delivery dates of November 19, 2021, January 10, and March 11, according to prior reports.
It should be noted that Pakistan LNG Ltd., the country’s second-largest state-owned petroleum entity that imports LNG on behalf of the government, has a five-year deal with GUNVOR at an 11.6247 percent Brent slope that expires in July this year.
To address the shortfall, Pakistan LNG Ltd. issued two tenders for spot LNG, with the lowest bidders being Vitol Bahrain at $34.6777/MMBtu for the April 21-22 window, and PetroChina at $33.5300/MMBtu for May 14-15 delivery. These are some of the highest LNG import costs paid by Pakistan, resulting in downstream prices that make natural gas prohibitive in several industries.
“There is a possibility that two more tenders will be called for the June and July delivery period,” an energy ministry official told S&P Global Commodity Insights.
Other bids for the April 21-22 window were ENOC Singapore at $37/MMBtu, TotalEnergies at $36.77/MMBtu, and PetroChina at $34.99/MMBtu. Other bids for May 14-15 were TotalEnergies at $37.77/MMBtu and PetroChina at $33.53/MMBtu. According to industry sources, the government may not accept even the lowest offers since, after adding port handling taxes and other expenditures, the imported value of LNG on the day of arrival may be as high as $41/MMBtu.
In addition to Pakistan LNG, Pakistan State Oil, a state-owned national oil corporation, is set to import seven LNG cargoes in April and eight cargoes in May under long-term contracts with Qatar. The two long-term agreements with Qatar expire in 2031 and 2032, respectively, at Brent slopes of 13.37 percent and 10.2 percent.
Pakistan LNG also has a 15-year LNG deal with the Italian gas business ENI, under which LNG was priced at a Brent slope of 11.624 percent for the first two years, before rising to 11.95 percent for the next two years. LNG was priced at 12.14 percent of Brent beginning in the fifth year, with the contract terminating in November 2032.
According to figures from the Pakistan Bureau of Statistics, Pakistan’s LNG imports for the eight months of the fiscal year that ended on February 28 were $3.078 billion, nearly double the total of $1.499 billion in the corresponding period last year.
