PSO scraps spot tender, turns to long-term deal with Qatar

Javed Mirza Web Editor

16th Sep, 2021. 08:06 pm
There is no shortage of fuel, sufficient stock is available in the country: PSO

KARACHI: The Pakistan State Oil (PSO) has scrapped the liquefied natural gas (LNG) spot tender for October 22 and 23, 2021 and replaced it with a cargo under the long-term contract from Qatar Gas using contractual provisions and prudent rescheduling.

To recall, PSO bought a spot shipment for delivery on September 26 and 27 at the rate of $17.85/mmbtu. It was the costliest purchase, as the commodity prices shot up due to higher demand.

Natural gas prices around the world are surging due to supply restraints and a shift away from dirtier coal. There is a growing fear that the lack of investment in the new upstream capacity could result in higher prices for a longer period.

The Asian LNG prices soared towards $20/mmbtu this week, as the supply constraints in Europe provided competition for the Asian buyers.

The average LNG price for October delivery into Northeast Asia was estimated at around $19.90/mmbtu, up $2.70 from the previous week.

An analyst said the LNG buyers were so hungry for cargoes that the vessels were lining up off Qatar. “South Korea and Pakistan are among the buyers, seeking to maximise [the] shipments under long-term contracts with Qatar.”

PSO strategically planned for winters in advance, when spot prices are usually at their highest, and arranged 28 cargoes instead of 20 under long-term contracts (six cargoes each in January and February, 2021 and eight cargoes each in November and December 2021).

“This has been planned to meet the ever-increasing gas demand in winters at the lowest possible rates. Compared with the current spot market rates, this translates into approximate savings of $295 million,” the company noted in a communique.

PSO has also enabled considerable savings by reducing the number of spot cargoes from 12 to 4 in 2021 using contractual provisions available, while maximising the long-term cargoes through contracts from 60 to 70.

Further, the company has reduced the suspension period of LNG supply in September 2021, owing to the scheduled FSRU dry-dock activity from approximately 90 hours to 60 hours, by bringing the FSRU laden with cargo under the long-term contract with Qatar; thereby, curtailing the downtime for the industry and saving considerable cost to the economy.

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