Pakistan State Oil (PSO) has clarified reports about purchase of liquefied natural gas (LNG) at higher prices.
In a statement on Sunday, the company clarified that no cargo from a long-term supply contract in September has been dropped or cancelled by PSO as reported by certain media outlets.
As per the Annual Delivery Plan (ADP) agreed with all stakeholders, four cargoes were to be supplied under the long-term contract in the month of September and two spot deliveries were planned.
It said that PSO’s long-term contract for 60 cargoes a year is not equally divided over 12 months. PSO prudently planned winter (January-February and November-December) in advance, when spot prices are usually higher, and arranged 28 cargoes instead of 20 under the long-term contracts – 24 cargoes from the existing long-term contract and 4 additional cargoes from the recently executed long-term contract commencing in January 2022 by exercising contractual rights.
This has been planned to meet the ever-increasing gas demand in winters at the lowest possible rates. PSO has enabled considerable savings through effective planning and contract management by reducing the number of spot cargoes from 12 to 6 this year using contractual flexibilities available while maximising long-term cargoes through contracts from 60 to 70.
As far as the timing of the tenders is concerned, awarding cargoes ahead of the required delivery windows or awarding a strip of cargoes in one go does not suit PSO since the company has certain contractual flexibilities available under long-term contracts and spot purchases are very few in a year as mentioned above.
For example, due to the unplanned dry dock activity of FSRU in June-July and uncertain situation in September considering scheduled FSRU replacement, had PSO awarded July and September spot cargoes in advance, the company would have had to either drop much cheaper contractual cargo or face Take or Pay penalty. Therefore, spot purchases are finalized after carefully seeing the demand-supply dynamics and market conditions.
The bids received against the required deliveries in September 2021 are yet to be awarded by PSO. As per procedure, the received bids will be presented to the company’s Board of Management along with the supply/demand situation & global price trends and a decision will be arrived at accordingly.
Considering that 2021 has seen exceptionally high LNG prices in the international market, the planning and management of contracts done by PSO will not only absorb the impact of higher spot prices but also result in potential savings. As the national flag bearer, PSO is committed to safeguarding national interest and leaves no stone unturned to fuel the country’s progress, said the statement.
