Worsening shortage of gas- RLNG supply to power plants and export industry halted

Pakistan is facing severe shortage of gas as concerned authorities failed to import LNG on time 

Both the domestic and industrial consumers of gas in Pakistan are facing severe shortage. The failure of the  petroleum ministry officials to make timely decisions to import LNG led us to the situation we face today.  

It has become a norm in recent years that people face severe shortage of gas as the winter starts. This winter in no different. There is shortage of gas and domestic consumers are complaining about low gas pressure. They are facing problems in cooking at homes and forced to buy food from the restaurants.

 

As expected, the government has halted the RLNG supply to all sectors of economy as Sui Northern on Saturday also stopped imported gas supply to power plants and export industry. The Sui Southern will today (Sunday) cease the supply of imported gas to the export industry. No RLNG is available to CNG, fertilizer, and captive power as the government has stopped gas supply to power sector and export industry.

The RLNG demand for January to the power sector stands at 250 mmcfd. However, the Sui Northern slashed the RLNG supply to 155 mmcfd some days back, which further tumbled to 125 mmcfd by last Friday (January 08, 2021) and now on Saturday, the RLNG gas supply to the power sector was virtually shut. 

The gas demand of the country at present is more than 6 billion cubic feet per day. While 4.156 bcfd, including 3.2 bfcd local gas, is available in the system. The country has capacity to import 1.2 bcfd but 956 mmcfd imported RLNG is available. The second PGPL LNG terminal is currently underutilised as it is just re-gasifying 350 mmcfd LNG.

The gas crisis has intensified since the government made delayed decision to import the LNG for January. The government issued the tender for import of LNG in January late. The prices has gone up significantly in winter. The latest tender placed for the procurement of three shiploads of gas for delivery in the latter half of January by Pakistan LNG Ltd, for example, has attracted the highest-ever minimum bid rate. 

No supplier had bid for the same amount of LNG the government wanted delivered between January 8 and January 18. It is for the first time in the last five years that a tender could not attract any response from the suppliers, raising concerns of greater shortages during the peak winter months. 

The spot rate of 17.32pc of Brent quoted for the first two shipments to be delivered between Jan 20 and Jan 27 is far more expensive than the one offered during the summer for winter supplies and is significantly higher than 13.5pc for the long-term contract between Pakistan and Qatar. So it was clear that there will be severe shortage of gas during winter months. 

In Sindh, the situation is not very different, as in Karachi the imported gas supply to the CNG sector and captive power plants of general industry was already stopped. The RLNG gas supply to export industry in Karachi was never given as per the agreement in the winter season as it is currently facing 5-9 hours gas load shedding. And the Sui Southern is set from today (Sunday) to put a stop on RLNG supply to the export industry in Sindh.

With the closure of RLNG to the power sector,  the government will generate electricity from furnace oil and diesel owing to which the electricity cost will increase manifold against generation by RLNG. “Though the captive power plants meant for export industry were stopped for one day in a week as per the decision of cabinet, but the decision will reduce the textile products production by 16 percent. Its impact is expected next month in the form of decline in exports,” said executive director of APTMA (All Pakistan Textile Mills Association).

Even after closing down the supply to all sectors of economy, the domestic consumers across parts of main cities of Karachi, Hyderabad, Quetta, Peshawar, Lahore, Gujranwala, Faisalabad, Sialkot, Rawalpindi are either experiencing no supply of gas or it is available at painful low pressure. 

The fear which the media had been highlighting for the last many months that in January 2021, the RLNG crisis will worsen has unfortunately proven correct. The main reason is the government’s failure to arrange the LNG vessels for the first 20 days of January 2021 through future trade in August-September.

 The government arranged an urgent tender for three cargoes for the first 20 days of January, but the LNG suppliers came up with the highest-ever bids at $12.95-19.8 per MMBTU. So, the government dropped the idea to procure LNG for the first 20 days of January. The story does not end here as the government also received bids for two LNG vessels for February, 2021 at 21-23.4 percent of the Brent, which is again on the higher side.

In this winter season, because of the huge global demand of LNG, the LNG cargoes were already booked. Even freight cargoes were not available. The government was forced to procure LNG at the highest-ever rates for November, December and January and February.

However, the government rescheduled some LNG cargoes due in last December, 2020 to January, 2021 to stagger the impending gas crisis, but all endeavors seem to have gone futile.

Shahid Sattar, Executive Director, All Pakistan Textile Mills Association (APTMA), confirmed the development saying that the gas supply to export industry has been stopped and the closure of RLNG will reduce 16 percent textile products production, leading to decline in textile product export but the real impact in exports will appear next month.

                                                      Khalid Bhatti