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Gas Shortage Expected to Get Worse in the Next 60 Days

Pakistan is currently grappling with a severe gas shortage, and the situation is expected to worsen in January 2024. The State Oil Company of Azerbaijan Republic (SOCAR) is sending mixed signals about its planned liquefied natural gas (LNG) deliveries to Pakistan during this crucial winter period.

The potential non-availability of SOCAR’s LNG cargoes is set to intensify the gas crisis, prompting the government to reduce domestic gas availability from 8 hours to just 6 hours. Adding to the complexity, SOCAR may be unable to offer a distressed LNG shipment price for January, raising concerns about supply.

SOCAR’s reluctance to provide LNG cargo in January aligns with shifts in global LNG supply dynamics and distressed availability. As per contractual obligations, SOCAR is expected to give notice 45 days before cargo delivery, but the company might seek a revised offer for January 2024.

In response, Pakistan LNG Limited (PLL) is gearing up to issue tenders for spot cargoes in January, seeking exemptions from two PPRA rules. With these exemptions, PLL will proceed with tendering for spot cargo, attempting to address the looming gas shortage.

Already, the government has secured one cargo from Dutch firm Vitol based on the lowest bid. PLL also purchased one cargo from SOCAR, maintaining a price 10-20 cents lower than Vitol’s bid. These bids were crucial in securing additional LNG supply.

Looking ahead, Pakistan is set to receive four cargoes from Qatar at 10.2 percent of the Brent price in January 2024. Additionally, the country already receives five cargoes from Qatar at 13.37 percent of the Brent price. ENI, another player in the LNG market, is offering a short-term cargo at 12.05 percent of the Brent price.

Given the increased demand for petrol in Sui Northern to 1,100 MMCFD, and 960 MMCFD in January, Pakistan urgently needs two additional spot cargoes to meet its energy requirements in the coming month. The uncertainty surrounding SOCAR’s LNG deliveries adds complexity to an already challenging situation, requiring strategic and swift actions to address the growing gas shortage.

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