LNG Procurement In Line With Global Average: PD
ISLAMABAD, (UrduPoint / Pakistan Point News - 30th Jul, 2021 ) :The Petroleum Division (PD) on Friday clarified some facts of media reports about Liquefied Natural Gas (LNG) cargoes' recent procurement, describing it 'in line with global average for the importing countries.' "Roughly one-third of our monthly LNG purchases are on 'spot' basis (and the remaining two-thirds on long-term contract basis) which is basically in line with global average for the LNG importing countries," the PD said in a news release.
It maintained that the spot LNG commodity price had spiked recently to over $15 per MMBTU [Million British Thermal Unit] due to a variety of supply-related issues such as curtailment from Exxon's facility in Papua New Guinea and demand-related factors (higher in China & Japan due to warmer weather).
Therefore, the Pakistan LNG Limited board was forced to accept four LNG spot tenders at $15 per MMBTU price for September 2021; otherwise, the reliance on replacement fuel like furnace oil, which was even more expensive, would have resulted in September power prices, higher by at least 20 per cent.
"Moreover, if, due to RLNG shortage, we are forced to burn diesel to fulfill summer power demand, the resultant incremental electricity generation cost in September would be almost 50% more expensive. So, it's the lesser of the two evils," the PD noted and said "Finally, if we don't have enough RLNG in the system, the 'opportunity cost' of forced gas load shedding for the industrial sector also has to be accounted for.
" The PD said crude oil prices were currently around $75 per barrel (and the price of imported coal had also increased by almost 45 percent since January this year), so the prices of most energy related commodities were on the upward trend due to higher demand & limited supply factors internationally as economies opened up in the post-COVID scenario.
To the critics who question the 'timing' of various spot LNG purchases, it said no one, without a crystal ball, could perfectly time or beat an international commodity market. "There is also no evidence-based correlation between the spot purchase timing (i.e. earlier or later) and the actual price of LNG as it varies (up and down) from time to time due to a host of demand-supply factors."As a matter of policy, the PD said Pakistan could opt for 100% long-term contract purchases (either on a fixed $ per MMBTU, or a fixed percentage of varying Crude Oil price), but even that would expose it to an 'opportunity cost' should the spot prices fall at any stage due to any number of reasons.
The PD said it was doubling its efforts to enhance local gas production "by launching the next exploration & production bidding round, targeting high-potential 'surrendered' and 'under litigation' blocks, by the year end, In Sha Allah."