ISLAMABAD: Pakistan has intensified efforts to secure another LNG cargo from Qatar by August 25-26, as authorities seek to avoid purchasing expensive spot LNG amid a sharp increase in international prices that has pushed the cost of spot cargoes to around $21.22 per MMBtu.
Officials familiar with the developments said the government is exploring all available diplomatic and commercial channels to arrange the additional LNG cargo amid the heightened security situation in the Strait of Hormuz. Given the prevailing market conditions, procuring LNG through the spot market can place a significant additional burden on the country’s energy sector and further drive up power-generation costs. The landed cost of a spot LNG cargo in Pakistan is currently estimated at around $22.30-$23 per MMBtu.
The authorities are particularly reluctant to procure another spot cargo through the normal bidding process because of the steep prices prevailing in the international LNG market. Instead, efforts are focused on arranging supplies from Qatar, while consultations are also continuing with relevant regional and international stakeholders to facilitate the safe movement and arrival of LNG cargoes.
At present, both the PGPC and Engro LNG terminals are operating at approximately 130 mmcfd each, providing a combined gas supply of around 260 mmcfd to the national system.Officials said the berthing schedule of the next LNG carrier at the relevant terminal is expected to be finalised after August 25-26, indicating that the timing of the next cargo remains a key issue for the country’s gas and power supply planning.
The government is under pressure to maintain adequate LNG availability as RLNG remains an important component of the fuel mix for power generation, particularly when domestic gas supplies and other generation sources are insufficient to meet demand.
Sources said Pakistani authorities, particularly the National Coordination and Monitoring Committee (NCMC), are in contact with Qatar, Iran and the United States regarding arrangements connected with the safe passage and delivery of LNG cargoes.
The discussions assume added importance because LNG shipments and regional shipping routes are operating against a complicated geopolitical backdrop. Pakistan is seeking to ensure that LNG supplies reach the country without disruption so that the energy requirements of the power sector and other consumers can be met.
Officials believe that securing a Qatar cargo will help Pakistan avoid, or at least reduce, its dependence on the increasingly expensive spot LNG market.The government’s concern over spot LNG prices is also linked directly to their impact on electricity-generation costs.
Officials acknowledge that the expensive LNG cargoes imported during June and July have already contributed to a significant increase in the cost of RLNG-based electricity generation. In July, the average cost of electricity generated from RLNG rose to approximately Rs47.38 per unit, compared with around Rs35.5 per unit in June.
According to the latest generation data, Pakistan's power system generated 1,629 GWh of electricity from RLNG in July, representing 10.78 percent of total electricity generation.The cost of this RLNG-based generation amounted to Rs77.198 billion, resulting in an average generation cost of approximately Rs47.38 per unit.
The sharp increase in RLNG generation costs coincided with the arrival of several expensive spot LNG cargoes.According to available data, the LNG cargo delivered on July 27 was imported at approximately $21.88 per MMBtu. Another cargo delivered on July 21-22 was priced at $20.6999 per MMBtu, while a third cargo delivered on July 15-16 cost approximately $18.2345 per MMBtu.
Pakistan generated a total of 14,501 GWh of electricity during July, for which the overall generation cost was approximately Rs139.37 billion.RLNG contributed only 1,629 GWh, or 10.78 percent, of that generation. However, RLNG-based generation alone accounted for Rs77.198 billion in expenditure.
With both LNG terminals currently supplying around 260 mmcfd to the system, any disruption or delay in the arrival of the next cargo could place additional pressure on gas allocation and power generation.
