Pakistan, Qatar sign 10-year LNG supply contract

[MenInG]

ISLAMABAD: Pakistan and Qatar have signed another long-term Liquefied Natural Gas (LNG) supply contract for additional 200 million cubic feet a day (MMCFD) at around 31 per cent lower rate than the 2015 contract for 500MMCFD.

The 10-year agreement signed on Friday entailed the “lowest-ever publicly disclosed price under a long-term contract in the world” and was achieved through joint efforts of the political and military leaderships, said Special Assistant to the Prime Minister on Petroleum Nadeem Babar while speaking at a news conference after the signing ceremony.

The Pakistan Tehreek-i-Insaf government had at the outset of its term tried to renegotiate the long-term contracts with Qatar signed by the Pakistan Muslim League-Nawaz government in 2015-16 with similar assertions that it had secured the lowest long-term price and no major LNG purchasers — much larger than Pakistan — had until then got such a price.

Qatar had plainly declined even to discuss the existing contract, saying it had dozens of similar long-term contracts with other countries and did not want to set a precedent, but had offered to provide 20-25pc price discounts for the additional 200MMCFD LNG supplies considering the close friendly relations between the two countries.


However, the offer did not materialise then, as Pakistan did not have a capacity beyond 100MMCFD additional quantities at the time and also due to a disagreement within the cabinet for political reasons.

PM’s aide says political, military efforts behind the lowest-ever publicly disclosed price in the world

Mr Babar told the presser that the supply under new Qatar deal would replace demand of the two existing and expiring long-term deals.

Under the new agreement, which will be effective from January 2022, Qatar will initially deliver two ships (containing a total of around 200MMCFD of LNG) a month. Later, the supplies will be enhanced up to four ships (400MMCFD) at the rate of 10.2pc of Brent.

In contrast, the first Pak-Qatar LNG contract had been signed for 15 years, beginning with 100MMCFD (one ship each month) and later going up to 500MMCFD (five ships a month) at the rate of 13.37pc of Brent.

The new contract has a price renegotiation option after four years rather than 10 years that had been fixed in the previously signed contract.

The PM’s aide said the total spot purchases as of December 2020 averaged at 11.90pc of Brent compared to 13.37pc of Brent in initial three long-term contracts signed about five years ago. The new Qatar price at 10.2pc of Brent is also 15-16pc lower than average spot purchases of 11.90pc of Brent and would ensure price stability and affordability along with supply security.

Based on the volume of the new contract, Pakistan would pay about $316 million lower cost when compared to the same volume under the existing contract, Mr Babar said. “In 10 years, this works out to be $3 billion,” he added.

“Pakistan is providing $170m letter of credit (LCs) under the past contract compared to $84m under the new contract, which is also almost half,” he said. Total supplies under the fresh contract could touch 3m tonnes compared to about 3.75m tonnes of contracted quantities.

He said the fresh supplies would replace the long-term contract of commodity trade Gunvor that expired in December last and another to would end in another 14 months. This way, he explained, the two new but cheaper shipments would replace the two expensive shipments of the past.

Mr Babar said the new contract would become operational in January 2022 but also provided for at least one additional ship in December this year if needed. He said Pakistan State Oil would import the LNG from Qatar under the new deal as well, but flexibility terms had been incorporated in the contract in case import order was to be assigned to Pakistan LNG Limited (PLL).

The PM’s aide recalled that talks with Qatar had been initiated about two years ago when Prime Minister Imran Khan had visited Doha for the first time and then had three more engagements with the Emir of Qatar.

Responding to a question, he said Pakistan’s military leadership also had dynamic relations with Qatar that had been facilitating talks between the United States and Taliban for peace in Afghanistan. He said both the military leadership and political leadership had the common interest to work in the larger interest of all and the deal was one such joint effort.

Earlier, Mr Khan witnessed the signing of the agreement by Minister for Energy Omar Ayub Khan and his visiting counterpart from Qatar Saad Sherida al-Kaabi.

Published in Dawn, February 27th, 2021

 

[MenInG]

 

[Bewal Express]

This is excellent by IK and the negotiating team. Well done on a good job by providing LNG at a competitive price guaranteed for a number of years.

 

[MenInG]

Private sector importers pocketed billions of rupees due to misuse of the government’s Liquefied Petroleum Gas (LPG) Policy 2015 – a fact revealed during an emergency meeting that the Petroleum Division held on Sunday to discuss the new LPG policy with relevant stakeholders.

Under the 2015 policy, the local LPG producers paid 17% general sales tax (GST) whereas the importers paid only 10% GST due to an incentive announced for them by state-run Pakistan State Oil (PSO) and the Sui Southern Gas Company (SSGC).

As a result of this unjustified cut in the GST, the LPG importers pocketed around Rs20 billion. Interestingly, in its revised draft, the Petroleum Division had proposed further waiver of advance tax for the LPG importers, enabling the importers to pocket more money.

The government had imposed petroleum levy in the LPG Policy 2015 on locally produced LPG to equate prices with the imported LPG. The LPG Policy 2015 also promised tax incentives for the PSO and the SSGC to encourage import in a bid to provide subsidized LPG to the poor.

However, these two state-run companies could not import LPG substantially and the private importers availed all these tax incentives by importing the LNG in bulk.

During the meeting on Sunday, the LPG stakeholder raised the issue.

The petroleum rules bind the government and private sector to import deficit products.

However, private sector importers had imported LPG in bulk and excess quantity without following these rules. The Petroleum Division and the Oil and Gas Regulatory Authority (Ogra) had failed to implement these rules.

This resulted in forcing the state-run LPG producers like the Oil and Gas Development Company Limited (OGDCL), Pakistan Petroleum Limited (PPL) and Pak Arab Refinery (Parco) to reduce prices. This resulted in a loss to national exchequer as the government is the major shareholder of these companies.

LPG pricing

At present, the LPG prices are linked with Saudi Aramco Contract Price (CP). However, the Petroleum Division had proposed to link the LPG price with cost and freight (C&F) price that will be over and above the current price of $80 per ton.

Sources said the local LPG producers had raised the issue that all LPG imports were coming from Iran at a discount of $180 to $200 per ton compared to the CP price.

The local LPG industry was surprised why the Petroleum Division wanted to link it with the C&F price when the LPG imports were already at a lower price.

New draft of LPG policy

The sources said the majority of the LPG stakeholders had attended the meeting without an invitation. They said that the Petroleum Division had invited few LPG stakeholders so that it could get a nod on the policy ahead of placing it before the Cabinet Committee on Energy (CCoE) on Monday (today).

The Petroleum Division issued notification for a meeting on Friday evening and called a meeting at 6pm on Sunday. At the meeting, the LPG industry described the emergency meeting as an attempt on part of the Petroleum Division to approve a policy sans consultation.

The industry raised objections to the new proposed LPG pricing mechanism, imposition of petroleum levy on locally produced LPG, disparity in taxes, violation of the LPG Policy 2015 and auction of the LPG.

During the meeting, local LPG producers like OGDCL, Parco, PPL and MOL raised objections to auction off the LPG on a monthly basis instead of using the existing mechanism of allocating the LPG on a long term basis. The Petroleum Division had proposed an auction of the LPG quota on a monthly basis.

Local industry said that LPG marketing companies need to invest on building the LPG storages. Therefore, long term allocation of LPG quota encouraged the LPG companies to invest in infrastructure.

They said no company will invest in building infrastructure if they are not guaranteed long term allocation of the LPG. However, they said that LPG producers should be allowed to auction the LPG on a monthly basis if they have surplus gas.

State-run LPG producers raised the issue that oil refineries also produced the LPG. If they are unable to dispose of the LPG due to issues in auctioning gas they will drop production.

This will result in low uplift of gas from the oil exploration companies by refineries. Therefore, it would also impact supply of natural gas and crude oil to refineries if they cut production due to surplus stocks.

Responding to a question relating to the LPG scam, the Petroleum Division officials said the PSO and SSGC faced issues in importing the LPG due to the Public Procurement Regulatory Authority (PPRA) rules.

In the new policy, the Petroleum Division had proposed to waive the PPRA rules for these companies to facilitate them in importing the LPG.

 

[Bewal Express]

Didnt the Nooras have a special relationship with Qataris, and they paid a 1/3 more for the LNG. Why was that?

 

[cric_man]

Didnt the Nooras have a special relationship with Qataris, and they paid a 1/3 more for the LNG. Why was that?

It seems the special relationship was only meant to line noora & qatari pockets at the cost of Pakistani awaam.

 

[Bewal Express]

It seems the special relationship was only meant to line noora & qatari pockets at the cost of Pakistani awaam.

Shahid Pants down Abbasi needs to explain why IK has negotiated a deal a 1/3 less than they did with their " friends". Surely it should be the other way round. This aint a few Rps here and there, these are billion $ contracts.

 

[Last Monetarist]

https://tribune.com.pk/story/2313210/pml-n-demands-probe-into-the-most-expensive-lng-purchase

Pakistan Muslim League Nawaz (PML-N) President Shehbaz Sharif demanded on Saturday an investigation into the reports that PTI-led government purchased the “most expensive” liquefied natural gas (LNG) in Pakistan’s history.

The PML-N president, who is also the leader of the opposition in the National Assembly, while quoting an international media report about Pakistan’s LNG purchase said it validated the opposition’s claim of alleged embezzlement in the procurement of the LNG.

The revelation has proved that the government was constantly “misrepresenting the nation”. Shehbaz said that PML-N was buying LNG for $8 while the PTI-led government is buying for 15 dollars per metric million British thermal unit (MMBTU).

“The government is paying an additional 22.5 million dollars on the import of one LNG ship,” Shehbaz stated in a statement, adding that an additional 95 million dollars will have to be paid for the import of four LNG ships.

This month, the PML-N stalwart said, the public will have to pay 15 dollars per MMBT unit of LNG, which is an “injustice”.

He alleged that cheap LNG deals were available during the Covid-19 crisis but the PTI government deliberately delayed it despite being reminded by PML-N that cheap LNG could be purchased during the Covid-19 crisis.

In September 2021, he maintained, the government will pay $387 million for importing 11 LNG ships. He said that Trafigura – one of the world’s largest independent LNG traders – had offered cheap LNG in writing but it was not accepted by PTI government.

At that time, he said, LNG would have been available for four dollars if a three-year contract had been signed adding that the government did not sign a four-dollar deal and it was currently buying LNG at more than $15 per MMBTU.

“A cheaper LNG deal would have saved Pakistan 35.2 million dollars per ship,” Shehbaz said, adding if the contract for cheap LNG had been signed, the country would have imported 12 cargoes by now and saved a total of 422.4 million dollars, benefiting the country and the people.

Moreover, the opposition leader said that the PTI government could order at least 14 cargoes but was deliberately importing less and due to this strategy, expensive electricity was being generated from the furnace oil. To add insult to injury, he said, that is why gas is not available in the country for the CNG sector as well as the industry.

“If our proposal had been accepted, there would not have been a gas and electricity crisis in the country today and the nation would have got cheaper gas,” Shehbaz said. “This is not incompetence but the result of the desire to make money which should be investigated,” he demanded.

Referring to multiple cases registered against PML-N leaders in connection with LNG scandal, he said, cheap LNG buyers are facing jails and lawsuits while no one is holding accountable the world’s most expensive LNG buyers.

In addition, he said, long-term LNG purchase agreements are signed around the world but the PTI has adopted the method of spot purchase, which no other country in the world adopts.

Responsibility should be fixed and they should be held accountable on grounds of robbing the country and the nation, Shehbaz said, adding that the nation was being looted just like it was looted in flour, sugar and medicine scandals.

He lamented that the direct result of PTI’s policies was unemployment and inflation in the country.

 

[Napa]

Shahid Pants down Abbasi needs to explain why IK has negotiated a deal a 1/3 less than they did with their "friends". Surely it should be the other way round. This aint a few Rps here and there, these are billion $ contracts.

Anyone with any knowledge of the energy industry knows that the world prices of fossil fuels have collapsed during the last 6 years, and the outlook is very uncertain, so a seller is ready to offer long term contracts at a discount.

Prices today for Natural Gas are down by about 50% than what they were in 2014.




https://www.eia.gov/dnav/ng/hist/n9100us3a.htm

 

[Bewal Express]

Anyone with any knowledge of the energy industry knows that the world prices of fossil fuels have collapsed during the last 6 years, and the outlook is very uncertain, so a seller is ready to offer long term contracts at a discount.

Prices today for Natural Gas are down by about 50% than what they were in 2014.


View attachment 110833

https://www.eia.gov/dnav/ng/hist/n9100us3a.htm

Why post in something you have no ideal about, Maybe you need to understand how we buy our LNG before trying to look clever.

 

[Napa]

Why post in something you have no ideal about, Maybe you need to understand how we buy our LNG before trying to look clever.

Even someone with limited knowledge and intelligence would understand that the price at which long term contracts are negotiated are dependent upon the current price and expectations of the future.

As usual when you don't have anything sensible to say, you resort to ad hominem attacks.

No more replies unless you come up with a sensible argument.

 

[Bewal Express]

Even someone with limited knowledge and intelligence would understand that the price at which long term contracts are negotiated are dependent upon the current price and expectations of the future.

As usual when you don't have anything sensible to say, you resort to ad hominem attacks.

No more replies unless you come up with a sensible argument.

Do your research and then debate. I am sure there is enough websites to explain how LNG is priced for PK

 

[topspin]

Anyone with any knowledge of the energy industry knows that the world prices of fossil fuels have collapsed during the last 6 years, and the outlook is very uncertain, so a seller is ready to offer long term contracts at a discount.

Prices today for Natural Gas are down by about 50% than what they were in 2014.


View attachment 110833

https://www.eia.gov/dnav/ng/hist/n9100us3a.htm

No no don't use logic here. It doesn't work well with PTI fans.

Great way to address: "Didnt the Nooras have a special relationship with Qataris, and they paid a 1/3 more for the LNG. Why was that?"

Oh Belawal bhai please never change

 

[Bewal Express]

No no don't use logic here. It doesn't work well with PTI fans.

Great way to address: "Didnt the Nooras have a special relationship with Qataris, and they paid a 1/3 more for the LNG. Why was that?"

Oh Belawal bhai please never change

Before you guys comment on the 10yr deals, it's worth spending a few minutes and researching how the price is determined for long term contracts for LNG. Hint it's relative [MENTION=142162]Napa[/MENTION] how you found out yet or will you disappear

 

[Bewal Express]

Even someone with limited knowledge and intelligence would understand that the price at which long term contracts are negotiated are dependent upon the current price and expectations of the future.

As usual when you don't have anything sensible to say, you resort to ad hominem attacks.

No more replies unless you come up with a sensible argument.

[MENTION=142162]Napa[/MENTION]
I am someone with Limited knowledge and understanding. Can you please help me to understand at how the LNG deal was priced. Thanks in advance

 

[Napa]

[MENTION=142162]Napa[/MENTION]
I am someone with Limited knowledge and understanding. Can you please help me to understand at how the LNG deal was priced. Thanks in advance

Normally commodities like LNG that are traded internationally will be priced according to global demand and supply.

When countries sign long term contracts there are additional considerations such as expectations of price changes, how critical the continued supply of the commodity is for the rest of the economy etc.

You are trying to continue this conversation even though you realize that you didn’t consider the collapse of energy prices from 2014 to 2021 when you criticized NS. Accept your mistakes and move on, that way you will get more respect.

 

[Ahmad-GERMANFC]

Doesn’t seem like Napa knows how LNG pricing work?

And is he seriously trying to say outlook for natural gas is worse today than 2015 lol?

 

[Bewal Express]

Normally commodities like LNG that are traded internationally will be priced according to global demand and supply.

When countries sign long term contracts there are additional considerations such as expectations of price changes, how critical the continued supply of the commodity is for the rest of the economy etc.

You are trying to continue this conversation even though you realize that you didn’t consider the collapse of energy prices from 2014 to 2021 when you criticized NS. Accept your mistakes and move on, that way you will get more respect.

As you claimed to be an expert i asked you to explain to me how the price was worked for this deal. So please explain

 

[Bewal Express]

Doesn’t seem like Napa knows how LNG pricing work?

And is he seriously trying to say outlook for natural gas is worse today than 2015 lol?

I am with limited knowledge and he has to explain as the expert with all the graphs.

 

[offstump]

Normally commodities like LNG that are traded internationally will be priced according to global demand and supply.

When countries sign long term contracts there are additional considerations such as expectations of price changes, how critical the continued supply of the commodity is for the rest of the economy etc.

You are trying to continue this conversation even though you realize that you didn’t consider the collapse of energy prices from 2014 to 2021 when you criticized NS. Accept your mistakes and move on, that way you will get more respect.

Lol, this is a terrible explanation and really has nothing to do with how LNG cargoes are priced, nor regional considerations when it comes to LNG.

 

[Ahmad-GERMANFC]

Lol, this is a terrible explanation and really has nothing to do with how LNG cargoes are priced, nor regional considerations when it comes to LNG.

He clearly thinks natural gas and lng pricing works the same way lol

 

[Napa]

He clearly thinks natural gas and lng pricing works the same way lol

LNG is natural gas that has been cooled down to allow transportation.

https://www.energy.gov/fe/science-innovation/oil-gas/liquefied-natural-gas

Over the medium and long term various forms of fossil fuels are substitutes so their prices track each other.

No more replies.

 

[Ahmad-GERMANFC]

LNG is natural gas that has been cooled down to allow transportation.

https://www.energy.gov/fe/science-innovation/oil-gas/liquefied-natural-gas

Over the medium and long term various forms of fossil fuels are substitutes so their prices track each other.

No more replies.

Thanks for your definition. I’m sure everyone knows that.

We are talking about demand dynamics. Both are seeing a different demand dynamic currently

Besides, Natural gas fired power plants are actually increasing as a % rather than decreasing. Not all fossil fuels are the same. Please don’t type out throwaway lines like an uninformed liberal in such matters. Thanks.

 

[Ahmad-GERMANFC]

Below is sourced from a recent McKinsey report and is for [MENTION=142162]Napa[/MENTION]’s knowledge. You’re welcome for increasing your knowledge on this matter. LNG is only going to
Grow.

“ Gas will be the strongest-growing fossil fuel and will increase by 0.9 percent from 2020 to 2035. It is the only fossil fuel expected to grow beyond 2030, peaking in 2037…. Meanwhile, LNG is set for stronger growth, as domestic supply in key gas markets will not keep up with demand growth. Demand is expected to grow 3.4 percent per annum to 2035, with some 100 million metric tons of additional capacity required to meet both demand growth and decline from existing projects. LNG demand growth will slow markedly but will still grow by 0.5 percent from 2035 to 2050, with more than 200 million metric tons of new capacity required by 2050.”

 

[offstump]

LNG is natural gas that has been cooled down to allow transportation.

https://www.energy.gov/fe/science-innovation/oil-gas/liquefied-natural-gas

Over the medium and long term various forms of fossil fuels are substitutes so their prices track each other.

No more replies.

LNG contracts are largely contracted to a price indexed to oil not natural gas. This is LNG pricing 101, there's no central global trading hub for natural gas such as Brent crude, and longer-term LNG contracts are almost exclusively oil indexed.

No more replies.

 

[Napa]

LNG contracts are largely contracted to a price indexed to oil not natural gas. This is LNG pricing 101, there's no central global trading hub for natural gas such as Brent crude, and longer-term LNG contracts are almost exclusively oil indexed.

No more replies.

I wrote "Over the medium and long term various forms of fossil fuels are substitutes so their prices track each other."

You essentially repeated what I said when you said LNG contracts are oil indexed. Both LNG and oil are fossil fuels.

 

[Bewal Express]

I wrote "Over the medium and long term various forms of fossil fuels are substitutes so their prices track each other."

You essentially repeated what I said when you said LNG contracts are oil indexed. Both LNG and oil are fossil fuels.

Do you understand how the LNG for the PK contract is priced or not because you came in with all guns blazing without any clue about the 10yr deal IK did compared to the Nooras and have since spent the time running from the thread.

 

[offstump]

I wrote "Over the medium and long term various forms of fossil fuels are substitutes so their prices track each other."

You essentially repeated what I said when you said LNG contracts are oil indexed. Both LNG and oil are fossil fuels.

Now you’re just trying to claim what your wrote was essentially what I said. If this is the case then explain the difference in price slope between the two deals, one has a lower slope on a shorter term deal, your logic doesn’t hold.

 

[Napa]

Now you’re just trying to claim what your wrote was essentially what I said. If this is the case then explain the difference in price slope between the two deals, one has a lower slope on a shorter term deal, your logic doesn’t hold.

You are not making any sense. My logic was that the 2021 deal had a lower price compared to the 2015 deal, because worldwide energy prices had collapsed during the last 6 years. Nothing to do with IK's negotiating skills, simply a collapse of world prices for fossil fuels due to higher efficiency, growth of alternatives like solar etc. Nothing you or others have said refutes the fact that there has been a crash in the world prices of fossil fuels over the last 6 years.

No more replies unless I see something sensible.

 

[Bewal Express]

You are not making any sense. My logic was that the 2021 deal had a lower price compared to the 2015 deal, because worldwide energy prices had collapsed during the last 6 years. Nothing to do with IK's negotiating skills, simply a collapse of world prices for fossil fuels due to higher efficiency, growth of alternatives like solar etc. Nothing you or others have said refutes the fact that there has been a crash in the world prices of fossil fuels over the last 6 years.

No more replies unless I see something sensible.

Backtracking. Your graph made no mention of the pricing of the PK LNG contracts. Post on things you understand or done your HW on.

 

[offstump]

Backtracking. Your graph made no mention of the pricing of the PK LNG contracts. Post on things you understand or done your HW on.

Of course he is backtracking and not actually addressing the pricing mechanism for this specific LNG contract. First he posts US nat gas import spot prices, then he says what he wrote was essentially the same as saying LNG is priced indexed to Brent crude. Napa, have you looked up the Brent crude price from 2015-2021? Brent is trading higher in 2021 vs 2015 lol.

I love this new way of ending a post when you know you’re wrong “no more replies until I see something sensible” when you’re the one posting complete and utter nonsense.

 

[Bewal Express]

Of course he is backtracking and not actually addressing the pricing mechanism for this specific LNG contract. First he posts US nat gas import spot prices, then he says what he wrote was essentially the same as saying LNG is priced indexed to Brent crude. Napa, have you looked up the Brent crude price from 2015-2021? Brent is trading higher in 2021 vs 2015 lol.

I love this new way of ending a post when you know you’re wrong “no more replies until I see something sensible” when you’re the one posting complete and utter nonsense.

The guy came on here trying to show us that we were wrong and is now looking for a way out.

 

[MenInG]

Finance Minister Shaukat Tarin Wednesday said officials in various ministries, including his own, were fearful of the National Accountability Burea (NAB) and the purchase of LNG at higher prices was due to fear of the anti-graft watchdog.

The finance minister expressed these views during his appearance on the Geo News programme "Aaj Shazeb Khanzada kay Sath".

Commenting on the government purchasing LNG at exorbitant rates and at delayed bargains, Shaukat Tarin said the petroleum ministry is not to blame, adding that the problem pertained to not just one ministry but to the entire government.

"We don't make purchase decisions on time as we fear prices may plunge. So, if we buy LNG at a price that goes down following the deal, NAB will hold us accountable," he explained.

He said NAB does not go after the SBP, which remains engaged with foreign exchange and money markets on a daily basis. "So, I proposed during the recent cabinet meeting to establish an institution comprising professionals who are aware of buying and selling practices throughout the year, so that we get the best price at the end of the day," he said.

He said the government will have to deal with the NAB issue in a professional manner as people are frightened of the anti-graft watchdog. "However, I will not speak on NAB as they served me a notice the last time I talked about it," he said.

"But, I know that people have this fear [of NAB] in my own ministry and in other ministries," he said, adding that accountability should be lauded but went on to say that there is a widespread fear of the burea.

He urged political leaders to sit together and sort the issue out, so that an "unjustified fear of NAB" dies down.

FBR data hack
Speaking about the Federal Board of Revenue (FBR) system getting hacked in a cyberattack, Tarin said the system has been restored with the help of world-class cybersecurity experts. He said the positive thing to focus on is that the hackers cannot access the data, he said.

Tarin said he was shocked and angry on not being kept in the loop about the hack, adding that those who did not pay proper attention to it tried to set things right on their own. The minister said he has directed the FBR to install internationally established best practices so that no cyberattack of a similar nature takes place in future.

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The FBR had faced a similar incident in 2019, he said, but they did not learn their lesson.

"However, I will make sure that no such thing happens in future." Tarin added, saying that he would take strict action against those responsible for the cyber breach of the system.

SAPM's resignation
Commenting on the resignation of Special Assistant to Prime Minister on Finance and Revenues, Dr Waqar Masood, the finance minister ruled out that the development took place over a difference of opinion over the Kamyab Jawan programme, saying that he had to ask him to quit as "Dr Waqar Masood's modus operandi was different from mine and two separate ways of tackling things can't work simultaneously."

"I am a private-sector man while he [Waqar] is quintessentially a bureaucrat. So, things were not evening out between two of us," he added.

Terming the Kamyab Jawan programme a revolutionary step, Tarin said the government is helping the poor at their doorstep, adding that it was not handout or charity. Rather, he noted, the government was offering people an opportunity to live in a dignified manner with a respectable source of income.

Replying to a question about the prospect of the Kamyab Jawan programme, Tarin said several checks and balances are in place to keep the programme up and running.

"I will be the biggest fool to embark on a project in the twlight years of my life that put my reputation on risk and jeopardise the banking system," he asserted.

Supervised by the Pakistan Poverty Alleviation Fund, there will be double audits by the State Bank of Pakistan-nominated auditors on disbursement of subsidies, he said.

With the government determined not to take any undue risk, the programme's recovery rate is 98 to 99%, Shaukat Tarin said, adding that if loss widens beyond 10%, the government will halt credit.

Tarin on IMF programme
"We are running ahead of tax targets and I am convinced that we will surmount the target of Rs5.8 trillion," Tarin said, replying to a question about the reinstatement of the International Monetary Fund's programme.

"There are two issues with the IMF: revenues and the power sector. The IMF wanted Pakistan to ramp up power tariffs as circular debt is on the rise. We are in talks with them in this regard."

The finance minister said that negotiations with the IMF will shortly begin. However, he reassured that cranking up power tariffs will not resolve the issue as it [increasing the tariffs] will render the industry rather uncompetitive and give a push to inflation, which will ultimately shift pressure on the poor.

The solution to the issue lies in driving up the economy by growing its capacity and the government needs five to six years for this purpose, he emphasised.

If the government hikes tariffs, stealing and losses will also increase, he said, underscoring the need to make DISCOs more efficient in minimising losses and maximising recoveries.

On the other hand, if the government succeeds in taking a moratorium on debt, the issue may stand resolved, he pinpointed. However, it is not as easy as it appears hence, the government needs some time, he said, adding that the Power Division is working on it.

 

[MenInG]

ISLAMABAD: Pakistan on Saturday accepted an LNG cargo at the highest-ever price of $30.6 per Million British Thermal Units (mmbtu) from Qatar Petroleum on the grounds of averting a possible gas crisis in the upcoming peak winter month.

The Pakistan LNG Limited (PLL) had floated emergency bids for two cargoes to be supplied in November, as the firms involved, Gunvor and ENI, had defaulted on their commitments.

The PLL has short- and long-term agreements with Gunvor and the ENI for one LNG cargo each every month, but both suppliers refused to honour their part of the agreements. As a result, the state-owned firm had to call a tender on emergency basis for two LNG cargoes for the months of December and January.

While the bids were called for cargoes to be supplied between Nov 19-20 and Nov 26-27, the PLL decided not to entertain the first bid for the middle of November.


PLL floated emergency bids for two cargoes after Gunvor and ENI defaulted on their commitments

For the delivery in the last week of the current month — Nov 26-27 — the lowest tender was filed by Qatar Petroleum Trading at $30.65 per mmbtu, followed by Total Energies at $30.96 and Vitol Bahrain at $31.05 per mmbtu.

Sources in the Petroleum Division said the first tender for supply on Nov 19-20 was scrapped as the country was facing gas shortage in December.

Therefore, the lowest bidder for the supply on Nov 26-27 was Qatar Petroleum at $30.65 per mmbtu, as re-gasification and supply of LNG into the system would be done in December, the sources added.

The PLL has been facing criticism for lacking proper strategies and ensuring LNG supplies when its prices were low in the international market. At the same time the state-owned entities had restricted the private sector from importing LNG as it could challenge the monopoly enjoyed by the public sector.

“The government has already floated the policy to allow the private sector to import LNG for their consumption and sale to various industries and sectors, but some government departments are creating hurdles in the implementation of this policy,” said All Pakistan CNG Association Chairman Ghiyas Paracha.

He said the Petroleum Division and the Oil and Gas Regulatory Authority (Ogra) had to take notice of this situation because the national economy and most importantly consumers were suffering due to expensive imports.

“We fear that the price of Compressed Natural Gas (CNG) will go up by Rs8-9 per kg in December because of the single cargo being brought at the cost of $30.65 per mmbtu,” Mr Paracha added.

Though the impact would be faced by industries, it is unlikely that the government may increase gas rates for domestic consumers.

The move to allow the private sector to import LNG independently had been on the cards since 2011. After passing through various stages, Ogra, in December 2018, approved the gas network code for use of pipelines of the Sui Southern Gas Company and Sui Northern Gas Pipelines Limited by any third party. However, the third party would have to obtain licences from the regulator and other relevant authorities and pay the pipeline use charges to the companies.

In November 2020, the Cabinet Committee on Energy (CCoE) had stressed on creating competitive market in the gas sector to end the monopoly enjoyed by both the state-owned gas utility companies – SNGPL and SSGC – and called on the private sector to perform an active role.

However, the idea could not materialise due to lack of planning and approvals by the state-run gas utility firms.

Meanwhile, the PLL has recently floated a tender to allocate idle capacity of LNG terminals on short notice for the supply of LNG equivalent to 385 million cubic feet daily (mmcfd) gas for December, 240 mmcfd for January 2022 and 275 mmcfd for February 2022.

The last date to file the application to obtain idle capacity at the existing terminals is Nov 18. At the same time, the PLL has said the available re-gasification capacities may vary both on a daily and a month-average basis based on the available berthing slots and requirement of the PLL’s own customers.

Replying to the query about the offer by the PLL to utilise idle capacity at LNG terminals, one of the private sector-licensed importers said the time to respond was too short.

On the other hand, analysts believe that the whole system needs revamping as it is not easy to determine the demand on a long-term basis to assess the idle capacity at LNG terminals.

“There is a continuous demand from the power sector and there are other long-term customers, therefore, determining the idle capacity for a period of four to six months in advance seems difficult for the PLL,” Head of Research and Development at Pak-Kuwait Investment Company Samiullah Tariq said.

Pakistan LNG Limited (PLL) is a public-sector company and is a wholly owned subsidiary of Government Holdings (Private) Limited (GHPL) which is 100pc owned by the Government of Pakistan (GOP).

The PLL imports LNG at the LNG terminal located in Port Qasim and supplies regasified LNG (RLNG) into the network of gas utility companies.

Published in Dawn, November 7th, 2021



https://www.dawn.com/news/1656453/pakistan-accepts-costliest-ever-lng-cargo-amid-gas-crisis

 

[Napa]

ISLAMABAD: Pakistan and Qatar have signed another long-term Liquefied Natural Gas (LNG) supply contract for additional 200 million cubic feet a day (MMCFD) at around 31 per cent lower rate than the 2015 contract for 500MMCFD.



Published in Dawn, February 27th, 2021

ISLAMABAD: Pakistan on Saturday accepted an LNG cargo at the highest-ever price of $30.6 per Million British Thermal Units (mmbtu) from Qatar Petroleum on the grounds of averting a possible gas crisis in the upcoming peak winter month.



Published in Dawn, November 7th, 2021



https://www.dawn.com/news/1656453/pakistan-accepts-costliest-ever-lng-cargo-amid-gas-crisis

I had written earlier "Over the medium and long term various forms of fossil fuels are substitutes so their prices track each other."

As expected, as fossil fuel prices have risen over the last 9 months, the cost of the LNG contracts for Pakistan has sharply escalated.

 

[Cpt. Rishwat]

fossil fuels rise to reflect worldwide price increase shocker.

 

[Napa]

fossil fuels rise to reflect worldwide price increase shocker.

Yes, as expected the rise in crude oil prices due to demand recovery and supply being restricted by OPEC+ has also caused LNG prices to rise.

 

[Last Monetarist]

https://tribune.com.pk/story/2333066/lng-terminal-only-70-utilised

The Petroleum Division has disclosed that Pakistan LNG Limited (PLL) has been able to utilise only 70% of capacity of the country’s second liquefied natural gas (LNG) terminal.

In a summary sent to the Economic Coordination Committee (ECC), the Petroleum Division said that at terminal two PLL had been procuring and handling between 35 and 62 LNG cargoes worth Rs1-1.8 billion per year depending on gas need and prices.

However, it pointed out that PLL, set up by the government for LNG imports, had utilised only 70% of the contracted capacity of the LNG terminal despite making 100% payment for the contracted capacity.

PLL is utilising 70% of the contracted capacity of 600 million cubic feet per day (mmcfd) whereas consumers have been paying for the total contracted capacity since the LNG terminal reached its commercial operation date (COD) in January 2018.

With rising gas demand in the country, there is a need to import LNG to satiate the appetite of the growing economy.

The Petroleum Division underlined the need for expanding existing capacity of the second LNG terminal in a bid to satisfy consumer demand.

It suggested that private sector should be permitted to import LNG, which would reduce financial risk for the government. There would be less burden of circular debt on the government with the entry of private parties into LNG business, it said.

At present, state-run companies are facing the spectre of financial default because of the circular debt pile-up following import of expensive LNG and its injection into the system.

The government has asked public utility Sui Northern Gas Pipelines Limited (SNGPL) to inject LNG into its pipeline network in the current winter season in order to avoid gas crisis, which has already resulted in Rs100 billion being stuck in the system.

SNGPL has not been able to recover the money from domestic consumers as there is no legal mechanism in place for the recovery.

Pakistan State Oil (PSO) imports LNG from Qatar and its bill for LNG supply has also got stuck. It has to recover Rs160 billion from SNGPL on account of LNG supply.

A cabinet decision taken in July 2020, which allowed the private sector to import LNG, has not been implemented yet despite 30% unutilised capacity of the second LNG terminal, owned by Pakistan GasPort Consortium.

The government has allocated the terminal capacity of 600 mmcfd but it has excess capacity for 150 mmcfd.

Pakistan GasPort and PLL have reached an understanding under which the former will get 100 mmcfd of the extra capacity whereas 50 mmcfd will be allocated to PLL.

Under the deal, in exchange for PLL’s permission to utilise 100 mmcfd of capacity, Pakistan GasPort will not charge tolling fee for the extra 50 mmcfd allocated to PLL.

Gas consumers have already paid $99 million in capacity charges for the idle capacity of the terminal. Now, they may face more burden if PLL fails to utilise the 650mmcfd capacity.

However, the private sector is going to import 100 mmcfd by utilising the excess capacity of the terminal after the ECC gives its stamp of approval.

The private sector has been struggling since 2015 to win allocation for the terminal’s idle capacity but it has not been able to bring even a single ship due to hurdles in its way.

As Pakistan GasPort has now been allowed to utilise the excess capacity of 100 mmcfd, there will be competition in the gas market.

 

[MenInG]

The annual gas crisis in the country makes many in the country wish that winters are either minimal or non-existent because having hot food, taking a warm shower, or keeping oneself cozy become luxuries.

While some can comfortably switch to alternatives like liquefied petroleum gas (LPG) cylinders, wood, or coal, in the colder months, for the average person these are out of reach due to retailers jacking up prices.

For instance, in the twin cities of Islamabad and Rawalpindi, the price of wood used as fuel has gone up to Rs 1,400 per kilogram (kg) and the price of coal has gone up to Rs 160 per kg. Whereas a small gas cylinder retails for Rs 900, a medium one for Rs 1,700, and a large one will cost consumers Rs 3,000.

The same prices are being charged in the raging metropolis that is Karachi, as well. Shahnaz Akhtar, a resident of the Liaquatabad area, while talking to The Express Tribune, said that since there was either no gas or incredibly low pressure between 7 to 9 in the morning, 1 to 3 in the afternoon and 8 to 11 at night cooking food had become a nightmare. “I bought a LPG cylinder for Rs 3,000 just so I could make food on time,” she lamented.

Similarly, Nadeem Islam, a resident of the Orangi Town area, complained that since gas was missing his monthly household budget had blown out of proportion. “I have to buy breakfast and dinner from restaurants which cost me an additional Rs 500 to 600 per day just because we do not have any gas,” an irate Islam said.

Currently, not being able to make breakfast seems to be a national problem. Khalid Khan, a rickshaw driver, and resident of Peshawar told The Express Tribune that he had to send his two children to school without breakfast because there was no gas during school timings. “I am being compelled to arrange an LPG gas cylinder, but the price point is beyond my range,” a visibly frustrated Khan said.

Some 514 kilometers away from Peshawar, Naila, a resident of the Garhi Shahu area of Lahore, expressed her anger at having to wait for hours just to be able to make food. “It is not even that cold yet and the gas cut-off has already started, cooking a meal for the adults and children at my house has become impossible,” she said.

Despite the gas-shortage or low pressures the bills have remained high. Shafiq Qureshi, who works at a bread making oven in Rawalpindi, colloquially known as a naan center, informed that even though gas was not available his normal monthly bill of Rs 15,000 was now between Rs 25,000 to 30,000. A despondent Qureshi remarked that even the protest against low gas pressure had no effect on anyone.

Considering the situation, some in the federal capital’s twin Rawalpindi, have taken matters into their own hands. The sale of gas pressure regulating machines, a gas generator of sorts which regulates gas pressure at the expense of other households, have gone up. The Express Tribune learned a Pakistani-made motor retails for Rs 3,000 to 4,000 while a Chinese-made one sells for anywhere between Rs 5,000 to 7,000.

Zafarullah, a resident of Rawalpindi, who complained about one of these devices as the reason for the low gas pressure at his house to the gas control room, said, “i was told that the issue would be fixed in 48 hours, but it has been 10 days now and I am still deprived of gas.”

Tired of protesting and complaining, Shehzad, a resident of the China Scheme area in Lahore, who made the switch from gas to electricity, informed that even this switch was not a solution. “The use of electric heaters and stove has made my electric bill go through the roof due to the high cost of electricity,” he said.

With the temperature expected to drop further, Lahore’s residents' problems might not be over anytime soon. A Sui Northern Gas Pipelines (SNGPL) spokesperson, informed The Express Tribune that they estimated that demand for gas, which was already at 700 million cubic feet per day (mmcfd), would reach 1,200 to 1,300 mmcfd as the cold snap intensified.

In Khyber-Pakhtunkhwa, where like Punjab, the SNGPL has curtailed gas supply to compressed natural gas (CNG) stations to prioritise domestic consumers in the winter, it has replaced 78 km of pipeline to ensure a smooth supply of gas, as per General Manager SNGPL, Taj Ali Khan. “We spent Rs 12.9 million this year replacing old pipelines in Peshawar and hopefully this will fix the issue,” he added.

As far as the gas generators are concerned, Sui Southern Gas Company spokesman Salman Siddiqui told the Express Tribune, that numerous complaints had been received and the department was taking action. “These devices obstruct the flow of gas in Karachi and are illegal to install,” Siddiqui told The Express Tribune.

https://tribune.com.pk/story/2333814/crippling-crisis-running-out-of-gas

 

[MenInG]

Energy Minister Hamad Azhar has claimed that gas shortage has nothing to do with liquefied natural gas (LNG) import, saying that gas companies will go bankrupt if the government starts giving imported gas to consumers.

“Legislation is being enacted to determine the average price of domestic and imported gas,” the minister said while addressing the OGDCL Annual Technical Conference on Tuesday.

Azhar said that for the last 10 to 15 years there has been a shortage of gas in the winter, while it has become a new statement under the incumbent government – “whether to buy LNG or not”.

The energy minister said, “In the past, this issue was not properly addressed due to which we are running out of gas at the rate of 9% per year.

“Local gas flow has dropped from 2,000 mmcfd to 800 mmcfd … we are going to legislate on the gas issue.”

Azhar said that unique style of virtual LNG terminals are going to be installed. “These terminals will be able to supply gas to consumers through gas pipelines.”

On gas shortage, he said that huge gas reserves had not been discovered in the country since 1950.

“The government is bringing a tight gas policy,” he said. “Some global companies want to invest in tight gas. We have to go for smart grids in remote areas.”

https://tribune.com.pk/story/2333983/gas-shortage-not-linked-with-lng-import

 

[silentkiller187]

ISLAMABAD:
The tender awarded to Pakistan LNG Limited (PLL) for the month of May is quite costly for the country mainly owing to supply-chain disruptions in the international market on the back of Russia-Ukraine war.

The firm selected the lowest bid for liquefied natural gas (LNG) cargoes. Out of seven, six contract prices for LNG cargoes were received. The cargoes were sought on an urgent basis after earlier committed cargoes were cancelled.

The lowest contract price for a cargo requested for May 1-2 delivery received at $29.67 per mmbtu from Total Energies Gas and Power. The second bid for the same delivery window was received from Vitol Bahrain at $29.79 per mmbtu.

Pakistan, which has increased its dependence on LNG in recent years, due to depleting indigenous natural gas deposits, issued a separate tender for six deliveries in May and June earlier this month.

Qatar Energy quoted the lowest bid for May 12-13 delivery at $25.15 per mmbtu and for the June 6-7 delivery window at $27.65 per mmbtu.

Total Energies Gas and Power again quoted the lowest bid for May 17-18, May 27-28 and June 16-17 deliveries at $31.77, $26.87 and $29.04 per mmbtu, respectively. There was no bid for the June 1-2 delivery window so far, industry sources said. The final decision on acceptance or rejection will be taken in a board meeting of PLL.

The CNG association and general industry hoped to resume gas supply which was suspended earlier this month due to shortage. “The government has taken a bold step and bought the LNG from the International market in this difficult time for reducing gas shortages and ensuring supply to power plants specifically and other consumers,” All Pakistan CNG Association Chairman Ghiyas Paracha stated.

The gas demand rises in the winter season because people in northern areas and Balochistan use gas geysers and heaters to keep themselves and their homes warm.

https://tribune.com.pk/story/2353670/pakistan-to-buy-expensive-lng-again

 

[MenInG]

Pakistan is poised to embrace a new LNG terminal as Daewoo Gas has signed an EPCF (engineering, procurement, construction and finance) contract with the Fourth Construction Company Limited (FCC) of China National Chemical Engineering Group Corporation (CNCEC) on April 21.

With a nameplate capacity of 2.5 million tons per annum (mtpa) of LNG, this project will consist of ports, storage tanks, distribution centre and regas trains in the long run.

The terminal will possibly be operated on the coast of Arabian Sea, south of Pakistan, according to Shahid Karim, CEO of Daewoo Gas.

“This terminal is for liquid sales with the adoption of Virtual Pipeline System Technique,” said Zhou Hong, General Manager of CNCEC-FCC.

Addressing the virtual signing ceremony, Karim said, “We hope that with the commencement of this project, Daewoo Gas will not only help meet the energy needs of Pakistan, but also contribute towards upgrading the natural gas industry with its innovative technology.”

Upon completion, this terminal will handle 10,000 tons of LNG per day at its peak, which will improve Pakistan’s energy supply, according to Daewoo Gas. Hong said, “Under the framework of the China-Pakistan Economic Corridor (CPEC), this project will not only effectively fill Pakistan’s energy gap, but also meet its demand for clean energy, energy conservation and emission reduction.”

“It is worth noting that the project will provide a comprehensive clean energy solution with higher efficiency, lower emissions and prices for both goods transportation and industrial power generation in Pakistan,” Hong added.

In addition, the Daewoo Gas LNG terminal project will create an estimated 2,000 to 4,000 job opportunities for locals. These include posts for management, operation, maintenance support, marketing, logistics and transportation. Hong said, “This large project represents the ideals of CPEC industrial cooperation and technology transfer between China and Pakistan, and will further strengthen the traditional China-Pakistan friendship.”

It is learnt that CNCEC has established an office at Karachi and FCC is planning to set up a branch in Pakistan in the future.

 

[MenInG]

The Oil and Gas Regulatory Authority (Ogra) has slashed the price of Liquefied Petroleum Gas (LPG) by Rs15 per kilogramme to Rs232 per kg for the month of May.

According to a notification, the price of domestic cylinder has been reduced by Rs180 and commercial cylinder by Rs692. The domestic cylinder will now be sold at Rs2,736 while commercial cylinder at Rs10,532.

The new price will be effective from May 1 (today). Meanwhile, the federal government has rejected Ogra’s proposal as it decided to maintain the prices of petroleum products at the current rate with effect from May 1.

The financial burden to maintain the prices will be borne by the government. Ogra had sent a summary to the federal government for an increase in the prices of petroleum products for 15 days with effect from May 1 but it was rejected by Prime Minister Shehbaz Sharif following which the finance ministry announced on Saturday that the rates would remain unchanged.

According to a notification issued by the finance ministry, the price of petrol will remain at Rs149.86 per litre; high speed diesel Rs144.15 per litre; kerosene oil Rs125.56 per litre and light diesel oil Rs118.31 per litre.

Earlier this month, Finance Minister Miftah Ismail, during his Washington visit, told the US think tank Atlantic Council that the government would have to increase the price of petroleum products to get the country’s economy back on track and revive the stalled bailout programme with the International Monetary Fund.

Express Tribune

 

[MenInG]

Responding to PML-N leader Shahid Khaqan Abbasi’s news conference where he held the former ruling party responsible for the current energy crisis in the country, PTI leader Omar Ayub Khan on Monday maintained that his party while being in power had signed cheaper LNG contacts than the Nawaz league and that these would save Pakistan $3 billion in the next ten years.

“This useless and incompetent government runs on assumptions only. People are suffering from load-shedding because the ‘imported government’ is not releasing money to the power plants,” Khan said in a statement.

The former minister claimed that the incumbent government lacked strategy and had been incurring high expenditures.

“The country suffered because of expensive power projects. The current shortfall in Pakistan is 8,800 megawatts. There was neither shortfall nor load-shedding during the PTI government,” he said.

“The new LNG contracts that we signed [while being in power] were 31 per cent cheaper than the PML-N. Pakistan will save $3 in the next ten years because of them.”

Separately, PTI leader Hammad Azhar lashed out at the “imported government” for making a mockery of the constitution and law, as mismanagement, lawlessness ruled the roost in the country.

He said Prime Minister Shehbaz Sharif who enjoyed razor-thin majority in the National Assembly “destroyed” all the sectors.

“The official date of the unscheduled prolonged power outages speaks volume about mismanagement and incompetence of the imported government,” he added.

Hammad stated that the unbridled inflation and prolonged load- shedding proved it the “worst ever government of Pakistan’s history”.

PTI Central Secretary Information Farrukh Habib also lambasted the government for its “timid and weak reaction” over the blasphemous remarks by the Indian ruling party’s MPs.

Addressing a press conference here on Monday, the PTI leader said that the government had wilfully adopted such a cautious approach on the issue of BJP lawmakers’ disrespecting remarks to safeguard and protect the Sharif family’s personal and business interests with Narendra Modi-led Indian government.

He said at the time when the entire Muslim world including the Arab states were unanimous on the point to boycott Indian goods, the imported government did not dare to issue a strong condemnation statement in this regard.

Turning his guns towards Maryam Nawaz, he said that a “criminal and convict” was using official protocol and had been “venting venom” on state TV.

EXpress Tribune

 

[MenInG]

Finance Minister Miftah Ismail said on Saturday that Pakistan will seek a deferred payment plan for liquefied natural gas (LNG) bought under long-term deals with Qatar as the country faces a balance of payments crisis and falling foreign exchange reserves.

Ismail unveiled the 2022-23 budget on Friday aimed at fiscal consolidation as Pakistan tries to convince the International Monetary Fund (IMF) to restart much-needed financial support. But the lender has expressed concerns over the numbers, including its current account deficit.

"We've talked about a deferred payment plan ... or at least I've requested this ... and [Pakistan's] petroleum minister is doing negotiations and is going to do the talks," Ismail told Reuters in an interview.

As it awaits IMF funds, the country is faced with falling foreign exchange reserves, enough for less than 45 days of imports, and a huge current account deficit — with energy purchases dominating the record import bill.

Global energy prices have risen to record levels in recent months amid reduced Russian supply and resurgent demand in Asia.

Petroleum Minister Musadik Malik, who was in Doha this week for talks with Qatari Minister of State for Energy Affairs and Qatar Energy chief executive Saad al-Kaabi, confirmed talks but said the government was exploring different "innovative" pricing and supply strategies in broad-based talks.

"Deferred payment obviously would be enormously beneficial for Pakistan in the way of cash flows, but that is not the only discussion that we are having," Malik said in an audio message, describing the discussions as "preliminary".

Qatar's government did not immediately respond to a request for comment.

Term contracts
In recent years Pakistan has increased reliance on LNG for electricity generation, but is facing widespread power outrages as procurement of the chilled fuel remains unreliable and expensive.

Ismail said the government was also speaking to Qatar about a new five or 10-year LNG supply deal for three monthly cargoes, as well as an additional cargo under an existing deal.

Pakistan already has two long-term supply deals with Qatar — the first signed in 2016 for five cargoes a month, and the second in 2021, under which Pakistan currently gets three monthly shipments.

Malik said Qatar was among multiple suppliers Pakistan was talking to for term contracts as it tries to navigate a "hot" and "pricey" market.

Pakistan has unsuccessfully tapped the spot market for an extra July cargo, with two tenders over the last week not returning valid bids.

Ismail said two other long-term suppliers had been unable to fulfil contractual supply obligations to Pakistan.

DAWN

 

[MenInG]

With a spiraling energy crisis brought on by the Russian invasion of Ukraine putting pressure on global fuel reserves, a key member of the federal cabinet admitted on Satur*day that the country simply could not compete with the buying power of European countries who were also potential customers for the same reserves that Pakistan desperately needed.

According to State Minister for Petroleum Musadik Malik, Pakistan’s failure to find a bidder for liquefied natural gas (LNG) slots had forced authorities to shift to alternative sour*ces of energy for power generation, which would take a month or so to yield results.

“The situation is that we have carried out two rounds of tenders of three to four tenders each, but no one responded to them,” he said in reply to a question put to him by a journalist during a media interaction on the sidelines of a two-day conference organised by the Centre for Excellence in Journalism (CEJ) at the Institute of Business Administration (IBA).

“Since supply from Russia is suspended due to the war with Ukraine, European countries are also buying gas from everywhere it’s available. As a result, LNG, which was priced at $4 two-and-a-half years ago, is no longer available for even $40. So, Russia’s war [with Ukraine] created a real crisis,” he said.

Musadik Malik says ‘pain’ from power shortages to last till at least July 15; govt exploring alternative means of energy generation

His thoughts came a day after the country failed to find a bidder for three LNG slots and received the highest-ever rate for another slot for the last week of July as European customers lapped up spot market quantities to compensate for the Russian supply disruption amid widespread electricity shortages.

The state-run Pakistan LNG Ltd (PLL) had floated a tender on June 16 for four cargoes — one each in the first and second weeks, and two in the last week, of July. However, no bidders came forward for the July 2-3, 8-9, and 25-26 delivery windows.

It is worth noting that this was the third futile attempt by PLL to have an LNG cargo in the first week of July. The earlier two tenders, issued on May 31 and June 7, attracted only two and one bidder, respectively, but none was technically responsive. Hence, the bids were returned unopened.

The minister told reporters point-blank: “We don’t have enough energy right now. The gas is not available and we can’t afford such expensive gas. So what we are doing is arranging alternates. The recent increase in production, imports of coal and furnace oil is part of the same strategy,” Senator Malik said.

Sharing the fresh moves the government was making to meet the growing energy glut, he referred to the import of five ships worth of furnace oil within a month and the larger amount of coal acquisition to keep power production units running.

Senator Malik was also confident that nature would favour them with the upcoming monsoon, which could help turn the tide of the power crisis to a large extent.

However, he cautioned that the ‘pain’ caused by power shortfall and loadshedding could take weeks to heal, adding that the situation was only likely to improve after July 15.

“We produce around 6,000MW to 8,000MW through hydel energy, but for that you need a certain amount of water flow,” he said. With an increase in imports of furnace oil and coal as alternative energy sources and the approaching monsoon rains that would improve water flows to enhance power generation through hydel energy, he said the government hoped to see some relief after July 15.

Senator Malik said he was sure that the Shehbaz Sharif’s government would have to pay a “political price” for these fresh measures, but termed them critical for saving the teetering economy that was brought to the brink of collapse by the Pakistan Tehreek-i-Insaf (PTI) government by its failure to foresee the growing demand for energy. Things had only gotten worse after the breakout of war between Russia and Ukraine, he said.

“We know what the political price of all these tough decisions is,” he said, adding: “Don’t you think we know that these decisions will hit our vote bank? We know it well. But what other options we have?”

“Should we sit idle and keep watching as the country turns into Sri Lanka? The PTI government did the same. They planted the landmines for the country’s economy for their political gains. We are here to save the country, not our politics,” the state minister concluded.

Published in Dawn, June 26th, 2022

 

[MenInG]

No end to this

==

The government on Thursday approved an increase in natural gas prices in the range of 43% to 235% with effect from July 1 in a bid to recover Rs660 billion from the majority of domestic and all other categories of consumers.

Addressing a news conference, Minister of State for Petroleum Dr Musadiq Malik said, “Nearly half of the domestic consumers have been protected from the surge but the burden on the upper class has been massively increased.”

The decision was taken by the Economic Coordination Committee of the Cabinet (ECC) that passed on the maximum burden of 235% onto those domestic consumers who have monthly consumption of up to four cubic meters. They have now been clubbed with up to five cubic meter gas consumers who will also pay the same maximum price of Rs3,712 per MMBTU but for them, the increase will be 154% over the existing prices.

Headed by Finance Minister Miftah Ismail, the ECC also withdrew its two-day-old decision to award a wheat import contract at $439.4 per metric tonne and scrapped the deal due to falling global wheat prices.

“The ECC approved the proposed revision in consumer gas sale prices with direction to further reduce the gas rates for export and non-export industry (captive power) against the proposed rates by Rs100,” according to the Ministry of Finance.

The decision will take effect from July 1, subject to the endorsement by the federal cabinet. Earlier, the ECC had recommended an increase in the electricity prices by Rs7.91 per unit, which Prime Minister Shehbaz Sharif endorsed.

The ECC approved an increase in the gas prices for domestic consumers using up to 0.5 cubic meters per month of gas to Rs173 per MMBTU – an increase of 43%. Their exiting rate is Rs121. For consumers using up to one cubic meter of gas, the prices have been kept unchanged at Rs300 per MMBTU.

The government tried to protect nearly 50% of the consumers from the increase in gas prices, said Malik. He said that those using cooking ranges and multiple heaters and geysers should also pay a price at least closer to what the poor people are paying for Liquefied Petroleum Gas (LPG).

The gas rates for domestic consumers of two to three cubic meters per month have been increased to Rs696 per MMBTU – an increase of Rs143 or 26%.

The consumers of up to three cubic meters of gas will now pay Rs1,856 per MMBTU price, which is higher by Rs1,118 or 152% over the existing prices. The existing rate for this category is Rs738 per MMBTU.

However, a major burden has been passed on to consumers using above three cubic meters of gas a month. As against their existing rate of Rs1,107 and Rs1,460 under two different slabs, a new single slab of Rs3,712 per MMBTU has been introduced for them.

The preceding slab benefit has also been restricted up to one cubic meter consumption, which means that higher consumption will be penalised. The domestic consumers of the two highest slabs will now pay a price that will be closer to the imported RLNG average price.

The government reduced the number of domestic consumer slabs from seven to five by merging the last two slabs and by merging the up to 0.4 cubic meters slab with 0.5 cubic meters. The new rate for the revised first slab is Rs173 per MMBTU.

The highest consumption slab will not be allowed the benefit of the lower slabs. It was decided that if the gas consumption in any of the past 11 months and the billing month exceeded the level of two cubic meters, the rate of the highest slab would be applicable. This mechanism would apply from the consumption of July 2022.

The bulk consumers would be charged at the average prescribed price of Rs928 per MMBTU by the Oil and Gas Regulatory Authority (Ogra).

The prices have been increased after October 2020 and their continuation would have caused a combined revenue loss of Rs165 billion to the two power distribution companies during this fiscal year.

Ogra had determined the prices to recover Rs547 billion from the consumers to save the two gas distribution companies from bankruptcy. However, the government decided to increase the prices to recover a total Rs660 billion.

The Sui Northern Gas Pipelines Limited (SNGPL) would recover an additional Rs331 billion from the consumers as against Ogra’s recommendation of Rs261 billion. The Sui Southern Gas Company Limited (SSGCL) would get an additional Rs335 billion as against Ogra’s recommendation of Rs285 billion.

“The purpose of increasing the prices higher than Ogra’s determination is to stop the buildup of circular debt in the gas sector in this fiscal year,” Dr Musadiq said.

The Petroleum Division said that the gas sector’s circular debt which was Rs299 billion in June 2018, had increased to Rs1.232 trillion on March 31, 2022.

The domestic sector consumes 47% of indigenous gas and only 27% of the population gets piped gas.

The ECC approved to sell gas to tandoors at Rs928 per MMBTU and it abolished the existing slab structure. This will increase the tandoor’s gas price by Rs231 per MMBTU or 33%.

The commercial gas connection prices have been increased by 81% to Rs1,038 per MMBTU but the government said that the proposed rate is still 58% cheaper than the LPG prices.

The captive power and processing consumers of the general industry have been charged at Rs1,550 per MMBTU – up by 47%, and the exporters at Rs1,350 – an increase of 65%.

The gas prices for the cement and CNG sectors have been approved at Rs2,321 per MMBTU, showing an increase of 70% for the CNG sector and 82% for the cement sector.

The export industry in Punjab is proposed to be charged $8.5 per MMBTU. The non-export industry in Punjab will be charged close to the full RLNG price. The government has also readjusted the priority order to provide indigenous gas to exporters and the general industry in Punjab.

The ECC on Thursday again could not decide about giving nearly Rs54 billion annual subsidy to the Utility Stores Corporation to provide cheaper wheat flour, edible oil, and sugar.

The finance ministry said that the ECC approved the continuity of distribution of subsidised wheat flour under Prime Minister’s Sasta Atta Initiative on 1,200 additional sale points in Khyber-Pakhtunkhwa for two months – July 1 to August 31, 2022 – with further directions to submit in the next ECC meeting complete mechanism on the distribution of subsidy packages through the USC.

The ECC scrapped the tender for the import of 500,000 metric tonnes of wheat – two days after it had approved to give a tender at $439.4 per tonne. The decision has been taken due to a reduction in the wheat prices in the global market.

The ECC directed the Trading Corporation of Pakistan to float a fresh tender for the import of 300,000 metric tonnes of wheat. Further, a committee has been formed on the directions of the prime minister comprising of ministers of commerce, national food security and research, and finance to ascertain the actual wheat requirement for the country.

The ECC also granted approval for the issuance of the government sovereign guarantees of Rs10 billion for the construction of two units of 660MW super coal power projects, Jamshoro, that is 90% complete, in favour of local banks/financial institutions under Syndicated Term Finance Facility (STFF) agreed with a local bank.

Express Tribune

 

[MenInG]

As European nations ramp up purchases of the natural gas as an alternative to Russian pipeline supplies, poorer countries are finding it really difficult to compete for the fuel due to high prices.

Alongside other developing countries, Pakistan’s LNG imports have decreased by 15 per cent due to the buying up by European Union members, according to a Wall Street Journal report.

LNG price has skyrocketed 1,900 per cent from its tariff two years ago. The current prices are equivalent to purchasing oil at $230 per barrel, whereas it is usually sold at a discount as compared to oil.

Developing nations are unable to compete with Europe for the import at prices of nearly $40 per million British thermal units (MMBtu), the WSJ report cited Wood Mackenzie data, revealing that European nations have jacked up LNG imports by almost 50 per cent year-to-date through June 19.

Similar to Pakistan’s, India’s imports during the said period have slumped by 16 per cent and China’s 21 per cent.

Express Tribune