Late Buying decision to cost Pakistan LNG procurement 40% expensive

December 8, 2020

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Pakistan’s Petroleum Division’s late efforts to procure LNG Shipments for December-2020 consignments is leading to 40% Costly LNG to the country. In a recent tender opened last month for delivery of 6 LNG Shipments in December, Pakistan has finalized bids at a pricing of 17% of Brent Crude Oil. This is more than 40% expensive then rates of up to 12% of Brent Crude Oil which were prevailing in June/July-2020. Had the Petroleum Ministry acted on time by July-2020, it would have led to relatively low Priced LNG Shipments in December-2020.

Pertinent to note is that Advisor to the Prime Minister on Energy and Petroleum, Nadeem Babar had mentioned many times on air that Pakistan will face massive Energy shortage in December-2020 even if it fully utilizes its LNG Terminal Capacity. With the known fact, Petroleum Division was unable to float LNG Procurement Tenders on time. The tenders for December-2020 was floated in October and was opened in November-2020. Likewise, tenders for January-2021 and February-2021 will be opened by end of December and are likely to be at a higher cost than what was prevailing in June-2020.

As per available data from JKM (Japan, Korea Marker) benchmark, during June to August-2020, LNG was available at rates up to $4/MMBTU for December-2020 delivery meaning that at $42-43 Brent oil, 10-12.5 per cent slope was available. However, the Government didn’t act on low rates and keep deferring the decision to buy at those rates. While as at now, December rates have gone up to $5.7/MMBTU, causing loss of billions of rupees