Comparison between LNG spot price in a high winter month and a long-term contract is irrational: PD - AsiaNet-Pakistan

Comparison between LNG spot price in a high winter month and a long-term contract is irrational: PD

December 29, 2020 | | Share:

Islamabad, December 29, 2020 (PPI-OT): This is relation to comments in certain section of media about two spot cargo bids received by PLL for deliveries in second half of February 2021. The Spokesperson says that Spot market for LNG is always higher in the winter months versus summer months given the global demand and supply dynamics. Comparing a spot price in a high winter month with a long-term contract is comparing apples and oranges. If the same comparison is made for a summer month, it will be much lesser. If a comparison is to be made, it can be made for a full year that includes all seasons.

In 2020, all the spot cargoes purchased by Pakistan averaged $ 6.84 DES (Delivered Ex Ship), including all the higher cost winter cargoes in January, February, November and December 2020. In the same year, all the cargoes received under long term contracts averaged $ 8.06 DES, a full 18% higher. It must be noted that PLL is bound to follow PPRA procurement process, which requires a 30-day tender with a ten day period thereafter. PLL starts the tender process approximately 90-100 days beforehand as soon as demand is confirmed. It is being repeatedly quoted that in 2019, tender for October -December was given in August while in 2020 the tenders were issued late. The facts are that a consolidated tender for October-December 2019 for 10 cargoes was issued in August, prior to confirmation of demand. When the demand was finally confirmed, only 3 out of these 10 tenders were awarded.

The average cost of cargoes in December 2019 was $7.81 which is higher than that of December 2020 at $6.34. It is pertinent to mention here that if LNG were priced as natural gas (which will require change in legislation) thereby ensuring price recovery for any sale, additional short term to medium term contracts can be put in place. Until such time, spot purchases can only me made once firm demand is established for consumers who are prepared to pay the full price. At this time supply side of LNG in the global market is very tight because many facilities are facing technical issues. It is expected that these supply constraints will ease by March 2021.

For more information, contact:
Principal Information Officer,
Press Information Department (PID)
Tel: +92-51-9252323, +92-51-9252324
Fax: +92-51-9252325, +92-51-9252326

Category: English, Official News