Islamabad: Pakistan LNG Limited (PLL) issued a tender (PLL/IMP/LNGT30) for three spot cargoes for March on December 16, 2020, and opened the bids on January 15, 2021, with bid opening to delivery ranging from 53 to 66 days.
According to a PLL press release, it received multiple bids for all cargoes but decided not to award, considering the rapidly changing supply and demand position. PLL issued an urgent tender (PLL/IMP/LNGT34) for similar delivery windows on January 21, 2021, with an average of 44 to 57 days from bid opening to delivery. The shorter lead time tender has been awarded, saving an estimated $30 million for the three cargoes compared to earlier.
It may be mentioned here that PLL had last week cancelled bids for LNG deliveries in March for three windows as prices in the international spot market started to crash. For replacement, the PLL went for a revised urgent tender on January 22 with a deadline of January 26. The revised bids attracted 26 to 38 % cheaper rates when compared with the cancelled bids.
Results obtained from PLL showed the lowest bid of 13.62% of Brent for cargo delivery in second week of March from ENI of Italy, when compared to 22.24% of Brent from the same company. This showed a reduction of almost 38% within a week.
ENI also turned out to be the lowest bidder for a cargo in the third week of March with 13.62% of Brent, when compared to 17.81% of lowest bid from Vitol for the same delivery window, showing a lower rate of 23.5%.
The lowest bid for the fourth week of March came out to be even lower at 12.73% of Brent from Qatar Petroleum, as against 17.19% of Brent with the lowest bid quoted by Vitol in the previous bid, showing a reduction of 26%.
The revised urgent tendering also attracted more bidders—a total of 20 bids for three delivery windows—when compared to a total of 12 bids previously, indicating that prices were easing in the spot market as demand dropped over the past couple of weeks.
Under the long-term contract, Qatar is providing LNG to Pakistan at 13.37% of Brent. Two major factors that contributed to the LNG market crash included an intervention by Japan’s energy regulator to exit the spot market in an attempt to ensure that power prices do not go up further amid warmer weather conditions, and South Korea’s decision against securing additional gas for February.
As a consequence, LNG traders hoarding the product had nowhere to offload their cargos, resulting in a fall in spot market. At present, European and Far Eastern importers are paying about $7.5 and $8.2 per MMBTU respectively. Market analysts now expect the LNG prices going down further to 10-12% of Brent or about $5-6 per MMBTU April onwards, until October next year.
