Ghulam Sarwar Khan, Federal Minister for Petroleum has said that Saudi Arabia and Malaysia are offering Liquefied Natural Gas (LNG) at relatively cheaper rates and the government is weighing its options on the matter, well informed sources told Engineering Post. The price of LNG as per the 2016 deal signed with Qatargas for 15 years at 13.37 percent of Brent is considerably more expensive than what is available at spot rates today. Qatar authorities did not accept the request of Pakistan government to provide gas valued at $4 billion on deferred payment during Prime Minister Imran Khan’s two-day official visit to Qatar, however, they agreed to supply additional LNG at cheaper prevalent market rates.
But now the rates of LNG have dropped considerably and it is cheaper to buy it on spot than through long term contracts.
On March 11, Pakistan LNG Limited finalized six cargos with deliveries scheduled for between May 1 and June 30 with the lowest evaluated bids ranging from between 9.2 percent and 9.9 percent of Brent price (Brent price of around $70 a barrel). LNG rates in the fixed spot market for deliveries in May dropped to $4.7 per million British thermal units (mmBtu).
It is pertinent to mention here that Pakistan cannot reduce supply from Qatargas under the 2016 deal as cancellation/reduction of what was agreed would be payable by Pakistan until Qatargas finds a new buyer. Any difference between the 2016 deal price and the price charged by a new buyer would be payable by Pakistan.
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