Pakistan declared an emergency bid for LNG on Thursday following further attacks in the Strait of Hormuz that caused disruption to the normal flow of gas into the country. This was confirmed by the state-run Pakistan LNG Limited (PLL) in an official statement made to Bloomberg news agency.
According to Bloomberg, there have been several disruptions in gas supply due to the attacks carried out recently around the Hormuz waterway. The reason for issuing an emergency tender by Pakistan was to ensure that the delivery of the cargo was done on July 15 and 16.
The tender was approved by the federal government on Wednesday following the cancellation of a Qatar-bound shipment of LNG that was en route to Pakistan one day earlier than expected. It has been reported that the Qatar ship was forced to turn back before completing its voyage across the strait.
Bidding Requirements and Time of Delivery
The deadline for the submission of bids is Friday, as per the Bloomberg report. The following is taken from the notice provided by PLL in which it has been stated that the shipment should be made using the DES (Delivered Ex Ship) terms in Port Qasim, Karachi. The size of the shipment has been set at 140,000 cubic meters.
This shows the haste of the situation. The Pakistan government had no option but to go ahead with the emergency tender for LNG once it was clear that the shipment from Qatar would not make it on time.
Increasing Regional Tensions behind the Disruption
Shipping in the Strait of Hormuz has been reduced to a crawl due to increased tensions between the US and Iran. It has been reported that the Iranians attacked some ships passing through the channel, including an LNG carrier, while the US conducted its revenge attack on Iranian assets for a second consecutive day.
This development adds to the existing precarious supply position of Pakistan which sources its LNG almost exclusively from Qatar through contractual agreements.
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Repeated Emergent Tender Requests for LNG
Less than a week prior to this request, Pakistan had also issued a similar tender for emergency LNG, requiring the delivery of the commodity between June 30 and July 4. This request also directly emanated from the disruption experienced at the Hormuz shipping lane as a result of an attack on a tanker carrying oil from Qatar and another on a Singapore-flagged cargo ship at the same location.
This was preceded by another incident within the year where there were claims of attacks on LNG facilities in Ras Laffan, Qatar. This led to QatarEnergy declaring force majeure status, leading to increased concerns over the reliability of LNG supplies among importing countries, including Pakistan.
The Larger Economic Effect
As Pakistan is heavily reliant on the LNG supply from the Middle East, a big problem has arisen with regard to the gas and electricity situation in the country because of its dependence on the Middle East for the imports of natural gas. Earlier this year, there was a power and gas shortage in Pakistan due to the fact that no ship was able to pass through the Hormuz strait from the Persian Gulf. Since then, Pakistan has been using a dual approach with regard to its procurement of the gas.
In the first week of May, Pakistan LNG made an opportunistic spot purchase from TotalEnergies SE for almost twice the usual contract price.
What Will Follow?
Following the bid deadline of Friday, the focus is now on the ability of foreign suppliers to meet the extremely tight delivery period of July 15-16. It is not uncommon for Pakistan to fail to honor its tenders in times of emergencies; at times, it tends to cancel tenders if another source of supply – such as Qatar – is again available or if the cost of bids become too high.
Nayab Fatima is a media professional specializing in fact-based journalism, research, and analytical reporting on technology, telecom, aviation, and automobiles.
