Pakistan seeks six-year LNG supply contract

[Major]

Pakistan Textile Exports Hit by Gas Crunch, Industry Body Says
By Ann Koh and Faseeh Mangi

$250 million of textile exports were lost in Dec., group says
Energy minister rejects claims low gas supplies are to blame
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Pakistan’s natural gas shortage is hurting its crucial textile exports, according to an industry trade organization, putting even more stress on the nation’s struggling economy.

About $250 million of textiles exports were lost last month after mills in Punjab were forced to shut for 15 days, said Shahid Sattar, executive director of All Pakistan Textile Mills Association. Factories in the province are dependent on power generated from regasified imports of liquefied natural gas, while domestic supply is being diverted to other regions, he said.


Pakistan has become a fast-growing import market for LNG as local supply has subsided over the last few years. But competition for the fuel -- used as an electricity feedstock and for heating and cooking -- has intensified due to global shortages, sending spot prices to levels that Pakistan can’t afford.

“The high gas prices are prohibitive,” Sattar said in an interview. The “supply shortfall is due to the energy ministry’s inability to arrange supply, and is hurting the very future of Pakistan’s exports and economy.”

Pakistan’s government, which has been criticized by the opposition for mishandling LNG imports, refutes claims that textile exports dropped because of low gas supplies. More than 90% of mills shifted to using electricity from the grid when gas wasn’t sent to their power generation units last month, Energy Minister Hammad Azhar said by phone, adding that “the electricity is being offered at regionally competitive rates.”

Pakistan restored gas to the textile sector last Wednesday after the association halted litigation against the government on the supply cut, and agreed to energy audits of their captive power plants. Only half of the companies have restored connections, while the rest are still running their mills on the national grid, according to the ministry.

See also: Pakistan’s Imran Khan Concedes Election Loss in Stronghold Area

Still, the gas shortage is hitting Pakistan at a critical economic and political juncture. The country is struggling with accelerating inflation and a weakening currency, with support for Prime Minister Imran Khan’s ruling party ebbing ahead of national elections due in 2023. The government also needs to raise taxes, and has just increased petrol price levies, as a pre-condition to resume its $6 billion bailout program with the International Monetary Fund.

The textiles industry -- which supplies everything from denim jeans to hats to buyers in the U.S. and Europe -- is one of the country’s few economic bright spots. Production grew almost 6% in the nine months through March 2021 and the sector accounted for 60% of total exports, government data show.

The country exported $11.4 billion of textiles in the nine months through March 2021, according to government data. Based on those figures, the lost $250 million probably amounted to around 20% of Pakistan’s textile exports last month, according to Bloomberg calculations.

Pakistan, which is heading into the coldest months of the year, issued an emergency tender to import more LNG in November after suppliers backed out from deliveries amid skyrocketing prices and surging global demand. More recently, gas trader Gunvor told Pakistan it would be unable to make a delivery scheduled for Jan. 10.

The country faces gas shortages every winter because Pakistan’s natural gas fields are seeing a depletion of about 9% each year and imported LNG is very expensive, Minister Azhar said at a press briefing in late December. Pakistan announced a bidding round to help find more oil and gas reserves, Azhar said in a Twitter post on Friday.

Despite the government restoring gas supplies to the textiles sector last week, frequent power blackouts are still curbing operations, Sattar said. Mills will only be able to run at about 80% of capacity if the situation persists, he said.

“Our history is littered with episodes of ‘stop-go’ growth caused by energy shortages and exorbitant costs, both of which are the result of mismanagement” by the government, Sattar said.

— With assistance by Jeff Sutherland, Ismail Dilawar, and Stephen Stapczynski

https://www.bloomberg.com/news/arti...ium=social&cmpid=socialflow-facebook-business

 

[MenInG]

Energy Minister Hammad Azhar on Saturday said discussions were under way with Russia to bring a gas pipeline from Kazakhstan, which will be cheaper than the imported LNG.

“We are working on substitutes as the local reserves are depleting,” he added while addressing a news conference in Islamabad.

“Laws are being made to mix imported LNG and imported gas with locally produced natural one to ensure supply to the domestic consumers in country.”

He said the gas brought from the pipeline from Kazakhstan would be expensive than the local one. “Therefore, this will require pricing mechanism.”

The minister said the government had recently introduced legislation of weighted average price of gas.

“The government had no legislation earlier to price gas if LNG was mixed with indigenous gas.”

He added that the National Assembly has passed this law a day earlier and this was a “historical moment”.

“We will now pursue it in Senate.”

Read: Opposition demands placing NSP before parliament

The minister said the present government had introduced historic reforms in different sectors including energy.

He highlighted that the State Bank Amendment Bill was essential in wake of the “politically motivated damage” done to the economy by the finance minister of the last government, referring to PML-N’s Ishaq Dar.

The minister claimed that this legislation will free the central bank from politicised decisions.

“While it is being politicised, but the autonomy of the State Bank is very important. The regular boom and bust cycles in the country has strong links with the autonomy of the central bank,” he added.

“State banks are autonomous in all stable economies, but here one former deputy governor was involved in money laundering for the finance minister,” he claimed, again referring to Dar.

Without naming anybody but in an obvious reference to Dar, he maintained that there was a time when the finance minister would make a call to the State Bank governor and give directions on the exchange rate.

“The SBP governor would use the loaned dollars to execute the directives given by the finance minister to maintain the exchange rates artificially,” he added.

“But in return, the foreign exchange reserves continued to decline. The country was flooded with imports and enhanced foreign debt.”

Hammad claimed that now there were market-based exchange rates. “The reserves are not used to maintain the exchange rates artificially.”

The minister further maintained that exports were being made competitive.

He rejected the impression that there was any risk to national security and pointed out that the governor, deputy governor and board of directors of the central bank would be appointed by the government.

He added that there was no need to give the political colour to the bill granting autonomy to the State Bank.

“Even the PML-N tried to present such a bill in 2015 but did not follow it themselves.”

Read More: NAB calls taxmen for ‘failing to provide information’

The minister noted that Pakistan had not been performing well over complying with the Financial Action Task Force (FATF) conditions.

“The country has been in the grey list, but the reforms taken by the present government have been acknowledged by the world. [A total of] 26 out of the 27 reform agendas have been achieved by the government in a record time.”

He highlighted other reforms taken by the government which included separation of customs from the Federal Board of Revenue (FBR) and tax policy, and it had resulted in the import of cheap raw material.

“Earlier, the customs policies were used to enhance tax revenues but it resulted in de-industrialisation,” the minister said.

“Now since the ministry of commerce will drive the customs policy, around Rs200 billion worth of input has been made. It has resulted in strong growth of industrialisation and the large scale manufacturing witnessed a growth of 12% in the last fiscal year, improved exports and reversal of de-industrialisation.”

He added that these measures had supported the stabilisation of the economy and expressed the confidence that the exports would touch $30 billion in the ongoing fiscal year.

“Our tax collection and exports are increasing as a result of better policies. We target to collect Rs6 trillion in taxes during the current fiscal year. Our GDP growth will be 5% in addition to $30 billion in remittances.”

Hammad maintained that the previous government had focused primarily on power generation and not on the transmission system, creating bottlenecks in the electricity supply.

The minister added that PIT-led government was focusing on improving transparency in the electricity generation as well as the transmission system.

“The previous governments made decisions on the take or pay basis giving enormous risk free benefits to the investors of their choice. But now we have introduced transparency in the whole affair, through a competitive open auction system.”

He said the maximum electricity transmission in the last era was 20,800MW.

“However, we already crossed that mark last summer and in 2023, the electricity transmission would be more than 30,000MW.”

The minister also informed the media that the transmission of electricity had started from the phase II of Neelum–Jhelum Hydropower Project and Karot Hydropower Project.

“Electricity will be supplied to Gujaranwala and Sialkot regions from there.”

The minister blamed too much reliance on imported fuel for the issue of fuel cost adjustment. “It is because of lack of long-term policy making by the previous governments.”

Read Also: Petrol price hits record high at Rs147.83 per litre

The minister claimed that around 70 to 80% of electricity would be produced from indigenous resources by 2030, either from hydel resources, renewable or local fuel.

He also highlighted that the government had smashed all cartels in the agriculture sector.

He added that the farm economy was strong and the result was visible in high off-take of urea.

Responding to a question about the complaints by Sindh on the Sui Southern Gas Company, the minister said that the provincial government there was used to issuing “non-serious” statements.

“It has always used the ‘Sindh card’.”

The minister claimed that Sindh was already consuming the majority of gas produced in that province.

“Industries in Punjab were consuming gas at five times the rate applicable to those in Sindh.”

Responding to a query about reports of an argument with Defence Minister Pervaiz Khattak, the minister said the PTI was a democratic party.

“Arguments are part of democratic norms. We are not one of those parties where top leaders cannot even speak in front of any child of a party leadership,” he added, referring to the PPP and its chairman Bilawal Bhutto Zardari.

https://tribune.com.pk/story/2338971/talks-under-way-for-kazakhstan-gas-pipeline

 

[mazkhan]

That's why you need coal , putting all eggs in one basket with lng and furnace oil .

Europe is experiencing this with increased gas prices and russian gas supplies.

 

[Kroll]

That's why you need coal , putting all eggs in one basket with lng and furnace oil .

Europe is experiencing this with increased gas prices and russian gas supplies.

I thought the problem was gas and not generating electricity?

 

[JaDed]

I thought the problem was gas and not generating electricity?

“Factories in the province are dependent on power generated from regasified imports of liquefied natural gas, while domestic supply is being diverted to other regions”

 

[JaDed]

That's why you need coal , putting all eggs in one basket with lng and furnace oil .

Europe is experiencing this with increased gas prices and russian gas supplies.

Any link to the same for Europe?

 

[daytrader]

Pakistan seeks six-year LNG supply contract
Pakistan issued a two-part tender seeking bid prices from well-reputed international LNG trading companies for six years agreement at a time when LNG shortfall in the international market has touched a new high

ISLAMABAD: Pakistan here on Saturday issued a two-part tender seeking bid prices from well-reputed international LNG trading companies for six years agreement at a time when LNG shortfall in the international market has touched a new high.

Since the 5-year LNG term agreement with GUNVOR expired in July 2022, the country’s fully-owned company Pakistan LNG Limited (PLL) has now released the tender for a term agreement for six years. Bids are invited from reputed international LNG suppliers for term cargoes on a delivered ex-Ship (DES) basis at Port Qasim, Karachi. In case Pakistan gets the best price bid, then it will purchase 72 LNG cargoes in six years, meaning one cargo having LNG quantity of 140,000m3 every month.

According to a top official at the Energy Ministry, PLL has issued a two-part tender. Under the first part of the tender, bids are invited for only one year i.e. 2023 starting from December 2022 to December 2023 under which 12 LNG cargoes will be delivered to Pakistan, one cargo a month. Under part two, Pakistan will seek 60 LNG cargoes for 5 years starting from January 2024 to December 2028 — one cargo every month.

Bidders will be bound to submit their bid prices for both parts of the term tender. However, Pakistan will have two options, to either accept both bids for one year and 5-year contracts or bid for the second part only for 5-year agreement depending upon the response from bidders. However, Pakistan will not accept bids for a one-year agreement alone.

Energy experts say it is not an appropriate time to issue the term tender arguing that the EU, USA, and Japan imposed sanctions on Moscow after Russia invaded Ukraine and the LNG producing countries and LNG trading companies are over-committed with European countries. They may have no space to make contracts with a country like Pakistan whose economic situation is too volatile and LCs confirmation charges are very high.

However, official sources say that Argentina, which has a worse economy than Pakistan, has recently managed to ink a term agreement at 15 per cent of the Brent on a prepaid basis. “So we are hopeful that LNG trading companies will reasonably turn up with their bid prices for two parts of the tender.”

Currently, Pakistan is relying on LNG cargoes under long-terms agreements. It is getting 6 cargoes per month from Qatar under a 15-year agreement at 13.37 per cent of the Brent, 2 cargoes again from Qatar under a 10-year contract at 10.2 per cent of the Brent, and one cargo under a 15-year agreement from ENI at 12.14 of the Brent.

The News PK

 

[daytrader]

Cold winter on the cards as govt fails to secure gas

• First attempt to buy LNG from spot market this year falls through as no bids received
• Power, gas outages may increase if situation persists

ISLAMABAD: The country has failed to secure liquefied natural gas (LNG) from the spot market in its first attempt after a year-long break, as it received no bid for six shipments for the coming winter months.

State-run Pakistan LNG Ltd (PLL), which last week floated short-term tenders for three cargoes each in October and December, announced on Tuesday that it received no bid for any of the delivery windows until the closing time at 12:30pm.

The LNG supplies in the spot market eased in recent months, with significant price drops to the pre-Ukraine war level. This prompted the PLL to test the waters for its winter energy gas shortage.

However, those dealing with energy supplies said Pakistan’s strained relations with the International Monetary Fund (IMF) and adverse credit rating amid foreign exchange limitations kept the LNG traders at bay, as the country has been struggling to line up letters of credit for necessary imports.

PLL last week also issued a separate tender for three more cargoes — two in January and one in February — with a bid deadline of July 14.

This would also put to the test the government-to-government supply contract signed with Azerbaijan’s state-run Socar because there would be no price discovery from the comparable spot market bids to determine the reasonability of the bilateral price.

The PLL used to import up to three cargoes a month through spot tendering to meet seasonal demands, but it has been facing difficulties in securing even a single cargo since June last year when its repeated tenders failed to attract any bidder. Earlier bids were simply unaffordable and beyond paying capacity of the country’s foreign exchange resources.

Instead, the government had to increase electricity loadshedding, besides rationing gas supplies and withdrawing subsidies to the export sector.

After a gap of over a year, the PLL now again floated international tenders for nine cargoes for delivery between October 2023 and February 2024 — a period when hydropower generation gets close to zero and the gas demand from residential consumers also increases with winter demand. The viability of the PLL-Socar relationship may be put to the test during those times.

...
https://www.dawn.com/news/1760904/cold-winter-on-the-cards-as-govt-fails-to-secure-gas

 

[daytrader]

RLNG cargoes arrive in Pakistan, easing gas crisis

In a recent development, multiple cargoes of Regasified Liquefied Natural Gas (RLNG) have arrived in Pakistan, bringing much-needed relief to the country’s gas crisis, ARY News reported on Thursday.

Petroleum officials have confirmed that the inclusion of RLNG in the gas system has played a pivotal role in resolving the crisis.

According to petroleum officials, the inclusion of RLNG in the gas system has proven to be a game-changer. The RLNG has been successfully integrated into the existing infrastructure, ensuring a steady supply of gas to power and fertilizer industries, both of which play crucial roles in the country’s economy.

Moreover, domestic consumers have also witnessed an improvement in gas pressure in their households.

Petroleum officials have stated that there is currently an ample supply of 1800 million cubic feet of gas in the system. This increased availability of gas is a testament to the efforts made by authorities to address the crisis promptly.

ARY

 

[YorkerKing]

The Sui Southern Gas Company (SSGC) Thursday announced that consumers in Karachi might face a severe shortage of gas supply from August 12 to 23 due to the maintenance of the Kunnar-Pasakhi Deep (KPD) gas field.



“There will be a shortage of 50 mmcfd from August 12 to 15 whereas there will be a severe shortfall of 107 mmcfd from August 16 to 23,” the SSGC said, adding that the maintenance work in the KPD gas field would take place from August 12 to 27.

The SSGC further said that the gas supply in the port city would remain affected from August 23 to 27 as well whereas areas at the end of the gas distribution system might also face gas supply shortfall.

The gas transmission company further stated that K-Electric (KE) had reduced its gas consumption by 33% due to which the gas shortfall might not be drastic.

“KE had given in writing that it would consume 90 mmcfd,” the SSGC said adding that the power company had shut down a power plant or a unit quoting the power company that 30 mmcfd gas was not required as the weather was good.

 

[daytrader]

PAKISTAN PREPARES STRATEGY TO COPE WITH GAS CRISIS

ISLAMABAD: The caretaker government has prepared a strategy to cope with the gas crisis during winter season this year, ARY News reported on Wednesday.

The caretaker government issued tender for Liquefied Natural Gas (LNG) for December 2023. The tender was issued by Pakistan LNG Limited (PLL) today.

Sources within the PLL told ARY News that Pakistan sought bid from global firms for two LNG cargoes in December. Pakistan sought the delivery of LNG cargoes from December 7 to 8 and from December 13 to 14.

The bids will be accepted by October 4 and they will be opened on the same day.

In July, Pakistan had inked a framework agreement with Azerbaijan for Liquified Natural Gas (LNG) procurement on flexible terms.

The agreement had signed between Pakistan LNG Limited and Azeri Company SOCAR in Lahore and was witnessed by Prime Minister Shehbaz Sharif.

Speaking on the occasion, the PM said the tenure of this agreement is one year which is extendable to one more year.

He said under the agreement, Azerbaijan will offer one Cargo of LNG each month and it will be up to Pakistan to either accept the cargo or not. He said there will be no financial penalty if Pakistan does not accept the cargo.

Pakistan prepares strategy to cope with gas crisis

ISLAMABAD: The caretaker government has prepared a strategy to cope with the gas crisis during winter season this year, ARY News reported on Wednesday.

arynews.tv

 

[FearlessRoar]

Pakistan purchases a LNG shipment from the spot market for the first time in more than a year, a move that will ease a winter energy shortage.

Source: Bloomberg

 

[daytrader]

Major natural gas reserves discovered in Sindh's Sajawal
PPL says wellhead flowing pressure recorded at 13.69 million standard cubic feet and daily production of 236 barrels

In a significant development that brings relief to the people of Pakistan grappling with a persistent gas shortage, the country's state-owned petroleum giant, Pakistan Petroleum Limited (PPL), has announced the discovery of substantial natural gas reserves in the Sajawal district of Sindh.

According to Express News, the breakthrough came after PPL conducted drilling operations to a depth of 2,545 meters at the Shah Bandar in Jhum East One location.

Preliminary testing revealed promising results, with a wellhead flowing pressure recorded at 13.69 million standard cubic feet and a potential daily production of 236 barrels. Ongoing drilling, overseen by experts, aims to further investigate and harness the full potential of this newfound resource.

...

Major natural gas reserves discovered in Sindh's Sajawal | The Express Tribune

PPL says wellhead flowing pressure recorded at 13.69 million standard cubic feet and potential daily production of 236 barrels

tribune.com.pk

 

[FearlessRoar]

Pakistan on Monday sued a foreign company in the London Court of International Arbitration for failing to deliver a liquefied natural gas (LNG) cargo to the country under a deal, sources said.

The court is likely to conduct proceedings on Pakistan’s petition in the coming month (January) in London, they added.

Sources said that Pakistan signed a 5-year deal with the company under which the company quoted the LNG price at 11.62% of a barrel of crude oil (Brent) for short-term supply for five years.

Pakistan LNG had a five-year contract with Gunvor at 11.6247% Brent slope that ended in July 2022.

According to sources, Pakistan had signed deals with commodity trader Gunvor and Italian energy company Eni for the supply of 10 LNG cargos. Both of the companies failed to deliver the cargo in the agreed time and supplied the commodity to other countries at higher prices.

It is pertinent to mention that Eni in January said that the delivery of LNG cargo to Pakistan LNG Limited that was scheduled for February has been disrupted due to an event of force majeure, Reuters reported.

The Italian company has a 15-year deal to supply Pakistan LNG with one cargo a month from 2017 to 2032. The LNG was priced at 12.14% of Brent with the contract expiring in November 2032.

“February LNG delivery disruption is beyond the reasonable control of ENI and due to an event of force majeure. ENI does not benefit in any way from the situation,” said the company in a statement to Reuters.

Sources said that the country is in talks with the other company to resumed the supply of the cargo and Pakistan has not filed a petition against it.

Source: AAJ News

Pakistan sues global commodity trader over failure to deliver LNG cargo

Pakistan had contracts with Gunvor and Eni for the supply of 10 LNG cargo

www.aajenglish.tv