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Pakistan justifies

expensive LNG purchases

The government has been forced to defend expensive spot
LNG purchases amid a firming of international gas prices

COMMENTARY THE Pakistani government’s liquefied natu- was watching the market and that if prices
ral gas (LNG) purchases have been under the retreated then PLL would retender the cargoes.
microscope this week, after state-owned Paki- The purchase, however, has created an
WHAT: stan LNG Ltd (PLL) paid more than $15 per opening for opposition party Pakistan Muslim
PLL has paid more than mmBtu ($414.90 per 1,000 cubic metres) for League-Nawaz (PML-N) to demand a probe.
$15 per mmBtu for spot spot deliveries in September. “The recent [regasified LNG] RLNG pur-
deliveries in September. The news was somewhat surprising, given chase, which is [the] most expensive to date, is
that the company cancelled a tender for eight a daylight robbery. The government failed to
WHY: cargoes in July on the grounds that $13.79 per benefit from cheap RLNG rates during COVID-
Spot LNG prices have mmBtu ($381.43 per 1,000 cubic metres) was 19 and is now making these costlier purchases.
soared, leaving the state too much to pay, but gave weight to reports this PTI’s [Pakistan Tehreek-e-Insaf’s] incompetence
company little choice. week that state-owned Pakistan State Oil (PSO) and greed will cause our nation [to lose] billions
had agreed to pay more than $20 per mmBtu of dollars,” PML-N president Shehbaz Sharif
WHAT NEXT: ($553.20 per 1,000 cubic metres) for LNG. tweeted on July 31.
Domestic gas prices will While PSO promptly denied the report, say- “This procurement has cost the country
likely rise, setting the ing it had cancelled the tender as the price was $422.4mn extra. The PTI government repeatedly
scene for further political too high, the country’s exposure to the spot lied to the nation on the matter as it has bought
uproar. market has left the government open to criticism LNG for $15 per mmBtu which the PML-N
from its political rivals. bought for $8 per mmBtu,” Sharif said.
The government, however, has argued that
Political fallout prices are high because the country relies on the
PLL paid its highest rates ever for LNG, after spot market for about a third of its spot purchases.
conducting a closed tender for September, As such, when prices climb, state buyers do not
local daily The News International reported last have the luxury to refrain from buying the fuel.
week. It said the state company had agreed to pay “It is known that the spot LNG commodity
$15.19-15.49 per mmBtu ($420.19-428.45 per price has spiked recently due to a variety of sup-
1,000 cubic metres) for four cargoes. ply-related issues and demand-related factors,”
The news outlet quoted unnamed Petroleum the government said. “Therefore, PLL’s board
Division officials as saying that although interna- was forced to accept the four LNG spot tenders
tional prices remained robust, the government for September 2021.”

P4 www. NEWSBASE .com Week 31 05•August•2021