KARACHI: Pakistan has failed to attract any bids against a tender floated to purchase six liquefied natural gas (LNG) cargoes from the spot market in the first attempt after almost a year, according to an official document.
Pakistan LNG Limited (PLL), a state-owned entity mandated to import and procure LNG, last week floated two tenders for the supply of LNG from the spot market after remaining inactive for almost a year due to high prices in the global market.
The PLL floated one tender for the supply of six cargoes, including two for October, one for November, and three for deliveries in Dec 2023, with the bid opening date fixed for June 20. The PLL did not receive any bid from suppliers for deliveries for the current year, a bid evaluation document posted on the PLL website said.
The possible reason for LNG suppliers to not submit the bids would be the issue of confirmation of the letters of credit (LCs), a PLL official, who declined to be named as he was not authorized to speak to media, told Arab News.
Analysts say LNG suppliers are reluctant to submit bids as Pakistan has not concluded its International Monetary Fund (IMF) program and they doubt the country’s ability to pay for gas in absence of the bailout funds.
"Though LNG market seems adequately supplied, it seems that suppliers were not interested to supply LNG to Pakistan considering growing risk amid country's dollar crunch specially after delay in IMF program," Farhan Mahmood, head of research at Karachi-based Sherman Securities brokerage firm, told Arab News.
The South Asian nation faces risk of a default after Pakistani authorities and the IMF failed to conclude the 9th review of a $6.5 billion bailout program Pakistan signed in 2019.
Pakistan needs on an average $4.6 billion to pay its monthly import bill, while the country's official foreign exchange reserves have dipped to $4 billion in the absence of IMF funds.
In order to restrict the outflow of dollars from the country, the government has taken various measures including slowed processing of LCs for imports, whereas overseas banks have also been reluctant to accept these LCs.
Bids for the second tender floated by the PLL for the supply of three cargoes, two in January and one in Feb 2024, will open on July 14, 2023.
Mahmood, however, said this would not have a major impact on Pakistan’s gas supplies due to industrial slowdown in the country.
Cash-strapped Pakistan has been out of the spot LNG market since June 2022 due to skyrocketing prices that hit record high of $69.9 per million British thermal units (mmBtu) for Asia deliveries in August 2022.
However, the spot LNG prices have since cooled down and hover around $13 per mmBtu for Asia deliveries. The spot prices dipped to $9 per mmBtu a week ago.
Pakistan meets more than half of its LNG requirement through long-term import contracts while the gap is met through spot cargo purchases. Pakistan has long-term agreements with Gunvor and the ENI for the supply of one LNG cargo every month.
The South Asian nation has imported $15.382 billion worth of petroleum products, including $3.4 billion worth of LNG from July 2022 till May 2023. The overall imports of petroleum products have declined by 22%, including LNG that declined by 19%, according to Pakistan Bureau of Statistics data.
