August 2022 saw only one LNG tender imported by the private sector. This was one better than no private imports a month earlier. Pakistan managed to arrange seven LNG cargoes in August 2022, of which six were imported under PSO’s various long-term arrangement. The six cargoes by PSO were evenly split between the long-term deal with Qatar at 13.37 percent slope and 10.2 percent with another private supplier.
This was also the first time Pakistan strategically arranged more cargoes on 10.2 percent slope, which played a big role in keeping the weighted average cost of RLNG down. The RLNG quantity imported in August 2022 is by far the lowest since April 2020, when Covid was peaking. It is also the joint-lowest ever since at least January 2019.
No, Pakistan’s requirement has not suddenly gone down, despite emerging signs of slowdown in demand. There just is not enough RLNG available in the spot market, as Europe rushes to bid at exorbitant rates. The fact that Pakistan went all out in procuring LNG at all costs in May 2022 is not lost on anybody, and that strategy has rightly taken the backseat now, with the authorities making a deliberate attempt to keep the balance of payment in check.
September 2022 promises to be much of the same, with the previous tender failing to attract any bids for any window of the month. There may or may not be more attempts made to throw another tender for September, but chances of that going through remain very slim. Unless events in the Russia-Ukraine war take a dramatic turn, the lull could well go deep into winters. While it may not be hurting much right now, winters could be tougher due to increased heating demand.
The cost itself for August at an average $16.9/mmbtu for SNGPL and $17.5/mmbtu for SSGC is the lowest in four months. For reference, imported LNG cost had surpassed $21/mmbtu in June 2022 excluding GST. This will also bode well for the headache that the monthly power tariff adjustments have become, although, it comes at a cost of forced load management and switching to other thermal fuels.
The import bill at around $320 million for August 2022 is now closer to the mean, although the cost remains considerably higher from last year. Pakistan is now attempting to arrange more LNG under long-term 5-year contracts to ensure supply security, with Brent slope agreement, instead of risking it all in the spot market. The next few months will be tough, both in terms of LNG availability and overall cost.