ISLAMABAD: Energy Minister Hammad Azhar on Monday stated that the government is doing all possible efforts to combat gas crisis in the country.
The minister stated that for the month of November, the government has arranged 11 LNG cargoes.
He added that two LNG trading companies have unofficially informed the authorities about the non-provision of two LNG cargoes for this month.
Azhar went on to state that if the companies excused themselves from the provision of the cargoes, the country will then have 9 LNG cargoes.
While shedding light on the upcoming LNG crisis, the minister stated that gas crisis is being faced globally. However, still the government is making all possible efforts to combat the crisis.
It is pertinent to note that two LNG trading companies have backed out of an agreement made with Pakistan LNG Limited (PLL) for the provision of two cargoes for the month of November, for mammoth monetary gains of up to 200% profit in the international spot market.
As per the details, the two LNG trading companies had made an agreement with PLL, with Italy-based ENI promising to deliver the LNG cargo on November 26-27 and Singapore-based GUNVOR promising delivery on November 19-20.
This action of backing out and not fulfilling the agreement by the LNG companies may expose the PTI government to a severe political backlash from people in the month of November.
It has been reported that the PLL has inked the term agreements with both companies to avoid purchase of LNG cargoes at higher prices, but both companies have backed out and defaulted on the agreements at a time when the spot LNG prices are hovering at $30-35 per MMBTU.
It merits mention that ENI is in a 15-year term agreement with PLL under which it is bound to provide an LNG cargo every month at 11.95% of the Brent and GUNVOR is also in a five-year term agreement and bound to provide a cargo at 11.6247% of the Brent.
Under the contract, in case of default, PLL can impose a penalty of 30% of the contractual price of one cargo to each LNG company and both companies are ready to pay the penalty as profit in the spot market is huge, prompting them to sell Pakistan’s term cargo to the international market.
As per sources, on October 30, ENI informed PLL that it won’t deliver the term cargo on November 26-27. Interestingly, ENI has committed default three times, including the latest one.
It first defaulted in January 2021 by providing half of the term cargo and then it did not provide a full-term cargo in August and now it has backed out of its term cargo due in November.
The LNG trading company has reportedly told PLL that its supplier has cancelled the cargo in the wake of commercial considerations and logistic issues, so it is not possible for it to deliver the term cargo in November.
The company said that there was a system breakdown at the loading port, which is why it may not deliver the term LNG cargo on November 19-20.
ENI has become a “habitual defaulter for monetary gains” by repeatedly selling the term cargoes of Pakistan in the spot market wherein LNG prices have jacked up to 200%, sources concluded.
