PLL gets 42 bids for LNG cargoes under new pricing mechanism

ISLAMABAD: Pakistan LNG Limited (PLL) has received 42 bids from a record 12 international traders for the eight liquefied natural gas (LNG) cargo deliveries between April 30 and June 28 against prices that are significantly higher than comparable period last year.

According to the bidding results finalised by PLL, Eni SpA of Italy secured three cargoes with the lowest prices while Qatar Petroleum and PetroChina won two cargoes each. Vitol Bahrain grabbed one cargo.

This was the first time that the LNG importer had sought open tender in fixed dollar rate instead of historic pattern of inviting bids in Brent Crude slope as defined in percentage of oil price.

EniSpA was declared successful lowest bidder for three cargoes — one each in April, May and June — at $6.7 per million British thermal unit (mmBtu) lowest bid price for all the three months. Qatar Petroleum was found as the lowest bidder for two cargoes in May at $6.825 and $6.925 per mmBtu.

PetroChina emerged as a successful bidder with the lowest price of $6.835 per mmBtu for June 8-9 delivery window and $6.885 per mmBtu for June 27-28 window. Vitol won May 31 cargo with $6.835 per mmBtu.

Though a total of 12 traders participated in bidding, no cargo attracted more than eight bids while one cargo received only three bids, which averaged out to five bids per cargo. Besides the winners, other bidders included BB Energy, Gunvor Singapore, BP Singapore, DXT Commodities, Trafigura, POSCO Intl, Total Gas & Power and ENOC.

Compared to $6.7 to $6.925 per mmBtu lowest prices for coming months, PLL’s average LNG delivery price ex-ship (DES) last month had averaged $3.69 per mmBtu in June, followed by $4.599 per mmBtu in May and $6.0555 per mmBtu in April 2020.

With relaxed procurement rules, PLL had sought eight import cargoes on March 20 at fixed dollar price and tight tendering schedule for delivery between April 30 and June 28. The last date for bidding was set for March 30 for cargo deliveries on April 30, followed by four cargoes — one every week — in May and three in June.

Except for a few emergency tenders a couple of months ago, the PLL had always sought bids as percentage of Brent Crude price and with longer terms for bidding, bid evaluation, award of contract and holding bidders for longer period. This resulted in various forms of limitations and higher bid prices as suppliers had to hold on their ships and LNG. This was unlike private spot players who could make final decisions on a short notice.

Late last month, the federal cabinet had granted partial exemption to PLL from Rule-35 of the Public Procurement Regulatory Authority (PPRA) rules by relaxing the period between announcement of evaluation report and award of tenders for spot cargoes. More than half of Pakistan’s total LNG imports are based on long-term contracts while the remaining needs are met through spot tenders.

The PPRA board of directors led by the finance secretary had recommended relaxations in its rules to the cabinet saying this would help secure economical and reliable spot LNG cargoes.

Under criticism for tendering process this winter, the Petroleum Division had demanded that mandatory period between evaluation of bids and award of contract should be reduced from about 15 days to two for a specific emergency case.

It also wanted exemption for reduction in 30-day response time which always exposed PLL to situations where following PPRA timelines, insufficient time was left for the vessel’s voyage, besides causing less competitive bids resulting in costly LNG procurement.