Outrageous Price Forces Pakistan to Scrap Purchase Bid for LNG Cargo

The government has decided to scrap the most expensive LNG spot purchase bid of $39.8/MMBtu for the month of July since it is too expensive for power generation, reliable sources told ProPakistani.

The new bid is almost $40/MMBtu which will push the cost of RLNG-based power plants to Rs. 35/unit in July, which is more expensive than furnace oil, coal, and even HSD, the sources said while citing the reason for scrapping the bid.

It is worth mentioning here that Pakistan LNG Ltd (PLL) has received a poor response from suppliers and against tenders of four liquefied natural gas (LNG) cargoes in July, the state-owned company has got only a single bid at $39.80/MMBtu.

For the month of May PLL had procured LNG at $29.67/MMBtu for the spot cargo for the May 1-2 window and $24.1500/MMBtu for delivery on May 12-13 window. In May the price of spot LNG was less than $30/MMBtu, and the cost of RLNG-based power was almost Rs. 28/unit.

On the other hand in May the per unit generation cost of coal, HSD, and furnace oil-based electricity was Rs. 18, Rs. 30, and Rs. 33.67 respectively, therefore for July, coal, HSD, and furnace oil will be a better option than LNG. During this week, the prices of crude have reduced in the international market, which means that for July the cost of furnace oil and HSD will go down as compared to May and will further decrease the generation cost from these sources vis-Ă -vis RLNG-based power generation, the source said.

When asked how the government will plug the demand-supply gap of electricity in July, the source said that the use of furnace oil and coal for power generation will be enhanced. Similarly, Pakistan will also start getting one additional LNG cargo from its new long-term contract with Qatar from next month.

Giving the detail the source said that currently Pakistan has two long-term contracts for LNG supply with Qatar and procuring seven cargoes from both governments to government agreements every month. Under the first long-term deal, the country receives five cargoes per month while under the second long-term contract it is getting two cargoes per month. According to the source that under the second long-term contract, Pakistan will start getting three cargoes from July.

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