KARACHI: These winters are going to be even colder primarily due to severe gas shortage, while the tender issued by the Pakistan LNG Limited (PLL) for eight LNG cargoes for December and January received not a single bid by the suppliers.
Shortages on the systems of both state-owned gas utilities have been increasing with the deficit on both Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company (SSGC) has reached to 275 million cubic feet/day.
The PLL had invited bids for the supply of eight cargoes of the liquefied natural gas (LNG) to be delivered in December 2021 and January 2022. The bids were to be opened on October 11, 2021, and there were no offers at all.
Last week, SSGC and SNGPL had announced suspension of gas supplies to all the CNG stations, cement, and non-export general industries, along with the captive power plants across their franchised areas.
Driven by the global energy rally, Asia’s spot liquefied natural gas (LNG) prices exceeded this week the psychological threshold of $50/million British thermal units (mmBtu). The $56.326/mmBtu price of the Platts benchmark Japan Korea Marker (JKM) for November was an all-time high at which a cargo of LNG traded in the Asian market, and was more than $20/mmBtu higher than the previous record of $34.52/mmBtu, set just last week.
However, rallying spot LNG prices, even if not as high as $50, had already started to destroy the demand, analysts say.
The price-sensitive buyers in Asia, such as India, Pakistan, and Bangladesh, are largely steering clear of the spot LNG market at prices above $20/mmBtu, let alone $50/mmBtu. More buyers are looking to lock in more volumes under the long-term contracts to avoid the immense volatility of spot prices.
Pakistan, for its part, is likely to slash spot LNG purchases this winter to avoid the record-high prices, which could result in a gas crisis in the country.