Pakistan bought a Liquefied Natural Gas (LNG) cargo from the costlier spot market this week, an official tender document showed, with a top energy ministry official saying Islamabad was “concerned” that renewed tensions in the Strait of Hormuz could threaten its energy supplies.
Despite signing a peace agreement brokered by Pakistan earlier this month, the US and Iran exchanged attacks in the Middle East last week, reigniting tensions in the Strait of Hormuz maritime trade route. Maritime traffic through the strait, which carried roughly 20 percent of the global trade in oil and LNG, came to ?a virtual standstill after the US-Iran war broke out in February. This caused supply disruptions worldwide, including in Pakistan, which also hiked prices of petroleum products.
BP Singapore Pte Limited, a global oil refining and marketing company, was the sole bidder that responded to the state-run Pakistan LNG Limited’s (PLL) tender issued on Monday. BP Singapore offered to supply 140,000 million cubic feet of LNG to Pakistan at a price of $16.7372 per MMBtu.
“Bids are invited from reputed international suppliers, for the supply of one (01) LNG cargo on a Delivered Ex-Ship (DES) basis at Port Qasim, Karachi,” the tender states on PLL’s website.
BP Singapore is required to deliver the LNG cargo between June 30 to July 4, as Islamabad needs fuel to keep five power plants running in the weeks ahead, an official at the energy ministry told Arab News.
“We will be tapping the spot market as this new US-Iran tension is a concern and is threatening our fuel supplies through Strait of Hormuz again,” the official said on condition of anonymity as he was not allowed to speak to media.
The official said PLL has started to buy LNG from the spot market as Pakistan does not have access to LNG from Qatar.
Qatar’s state-run QatarEnergy firm declared force majeure following Iranian attacks on two of its main facilities in March that halted its LNG production. The move dealt a blow to Pakistan and its aims to secure energy supplies.
“Qatar’s force majeure is in place till mid-July,” the official explained. “It has not been taken back by QatarEnergy, so we will be making spot purchases.”
Pakistan’s LNG suppliers include BP Singapore Pte, TotalEnergies Gas & Power, Vitol Bahrain, OQ Trading, SOCAR Trading and PetroChina International Singapore.
Islamabad has been floating and scrapping LNG spot tenders in recent months, depending on the relaxation it gets from Iran to allow Pakistan-flagged vessels through the Strait of Hormuz.
The official said Pakistan has so far received about five to six LNG cargoes under special arrangements from Qatar since the US-Iran war began in February, while it also bought two to three shipments from the spot market.
Energy-deficient Pakistan generates about 17 percent power from gas, including six percent from imported LNG and requires, on average, four to five LNG cargoes each month from the April to August period, he said.
“Five cargoes would be required in July to be supplied to the power sector,” the official said.
He said the government would buy at least four more LNG shipments from the spot market if the government does not receive any cargo from Qatar.
The official said spot cargoes cost Pakistan $16 to $17 per mmbtu of gas compared to the $10-$12 per mmbtu rate that QatarEnergy offers. Rising fuel costs have a direct impact on inflation in Pakistan, which is expected to range between 11 to 12 percent in June this year, the finance ministry said in a report on Tuesday.
An energy expert, however, said he were not bothered about the economic impact of a costlier LNG. “The government buying a spot pit is not that troublesome,” Muhammad Saad Ali, head of research at Lucky Investments Limited, told Arab News. “I don’t think it will be a big burden on the kitty.” He said the government is ensuring gas supply for Pakistan’s power plants, four of which are located in Punjab and one in Karachi. The analyst, however, said the government turning to spot LNG cargoes reflects that it is worried about the conflict escalating in the Middle East.