Page 18 - AsianOil Annual Review 2021

AsianOil AUGUST AsianOil

Pakistan justifies

expensive LNG purchases

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

SOUTH ASIA THE Pakistani government’s LNG purchases retreated then PLL would retender the cargoes.
have been under the microscope in August, after The purchase, however, has created an
WHAT: state-owned Pakistan LNG Ltd (PLL) paid more opening for opposition party Pakistan Muslim
PLL has paid more than than $15 per mmBtu ($414.90 per 1,000 cubic League-Nawaz (PML-N) to demand a probe.
$15 per mmBtu for spot metres) for spot deliveries in September. “The recent [regasified LNG] RLNG pur-
deliveries in September. The news was somewhat surprising, given that chase, which is [the] most expensive to date, is
the company cancelled a tender for eight cargoes a daylight robbery. The government failed to
WHY: in July on the grounds that $13.79 per mmBtu benefit from cheap RLNG rates during COVID-
Spot LNG prices have ($381.43 per 1,000 cubic metres) was too much 19 and is now making these costlier purchases.
soared, leaving the state to pay, but gave weight to reports in August that PTI’s [Pakistan Tehreek-e-Insaf’s] incompetence
company little choice. state-owned Pakistan State Oil (PSO) had agreed and greed will cause our nation [to lose] billions
to pay more than $20 per mmBtu ($553.20 per of dollars,” PML-N president Shehbaz Sharif
WHAT NEXT: 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 in have the luxury to refrain from buying the fuel.
August. It said the state company had agreed to “It is known that the spot LNG commodity
pay $15.19-15.49 per mmBtu ($420.19-428.45 price has spiked recently due to a variety of sup-
per 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 inter- was forced to accept the four LNG spot tenders
national prices remained robust, the govern- for September 2021.”
ment was watching the market and that if prices Asian spot LNG prices soared in August,

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