ISLAMABAD: The Oil and Gas Regulatory Authority (Ogra) on Monday notified a 13 per cent reduction in the price of re-gasified liquefied natural gas (RLNG) for October as the international spot market remained out of reach of Pakistan and average cost of cargos under a long-term contract slightly came down with oil price cut.

The basket RLNG price was also lower because of four cargos, instead of usual two, under the second LNG contract with Qatar that is available to Pakistan at 10.2pc of Brent. The LNG cargos from Qatar under the first contract stood at four for the period, instead of usual six, at the rate of 13.37pc of Brent.

According to a notification issued by Ogra on Monday, the average basket price for supply of LNG at import stage (delivered ex-ship) was worked out at $11.56 per million British thermal unit (mmBtu) for Pakistan State Oil (PSO) for eight cargos (all from Qatar) and $11.856 per mmBtu for Pakistan LNG Limited (PLL) for one cargo under another long-term contract with an LNG trader at 12.14pc of Brent.

The imported RLNG for two gas companies — SSGCL and SNGPL — thus dropped by about $2.2 to $2.3 per mmBtu, respectively, or about 13pc. The sale price for SSGCL was notified at $15.19 per mmBtu and for SNGPL at $14.78, respectively. This is on top of a 15-16pc drop to $16 per mmBtu at transmission stage in July compared to $19.07 and $18.8 per unit in June.

Cost of cargos under long-term contract declines with oil price cut

The RLNG price at distribution stage was notified at $15.18 per mmBtu in October from $17.476 for SSGCL, while it dropped to $14.78 in October from $16.98 for SNGPL, down by 13.1pc and 12.92pc, respectively. As such, the average RLNG consumer price at distribution stage is down by about $2.2 per mmBtu in October for both companies.

It may be noted that the LNG basket price in May had touched a record $22-24 per mmBtu owing to a string of spot cargos procured by the new coalition government in first month in office to meet energy shortages.

Since then, repeated efforts to import more gas through spot tenders have remained futile owing to tight supply conditions and record prices in the international market following the Russia-Ukraine war. As such, all the nine cargos each in October and September were available to Pakistan under long-term contracts, mostly with Qatar, except one from another supplier.

Mainly because of expensive spot imports in June, the average LNG-based power generation cost amounted to Rs28.4 per kWh (unit) — the second most expensive source of power generation after furnace oil at Rs36.2 per unit. As a consequence, fuel cost adjustment (FCA) for electricity increased by almost Rs10 per unit in August. The fuel costs of electricity have since dropped to 20-22 paise per unit.

The average sale price for Lahore-based SNGPL stood at $21.83 per mmBtu in May, up 40pc from $15.616 in April. Likewise, the average RLNG sale price for Karachi-based SSGCL stood at $23.79 per mmBtu in May against $16.91 in April, showing an increase of about 41pc.

Pakistan has two long-term contracts with Qatar, one involving six cargos at 13.37pc of Brent signed by the previous PML-N government and two-three cargos contracted by the PTI government at 10.2pc of Brent.

The average cost of six long-term contract cargos of PSO-Qatar stood at $5.78 per mmBtu in December 2020.

The LNG importers — PSO and PLL — are better off with even expensive imports because they earn windfall on account of retainage and margins at the rate of 3.22pc and 3pc, respectively, which obviously goes up with higher import price.

Pakistan had been in the grip of power shortages ranging between three and seven hours per day in the recent months mainly because of fuel constraints and lower hydropower availability. Against a firm power sector demand of up to 900 million cubic feet, the gas companies have been struggling to meet even half of that, causing countrywide power cuts.

Published in Dawn, October 18th, 2022