Govt Trying to Avert Gas Crisis After 2 Companies Back Out of LNG Deal

The federal government is making efforts to avert the countrywide gas crisis that seems almost inevitable after two LNG trading companies backed out from providing cargoes to Pakistan in November. Speaking in this regard, Federal Energy Minister, Hammad Azhar, said that Pakistan LNG Limited (PLL) had signed agreements with different companies for the supply of 11 LNG cargoes for November. Now, the country will have only 9 LNG cargoes in November as it gears for a severe gas shortage later this month. However, Singapore-based GUNVOR and Italy-based ENI pulled the plugs on their term agreements with the PLL recently. GUNVOR was set to deliver its LNG cargo between 26-27 November and ENI between 19-20 November. PLL had signed a 5-year agreement with GUNVOR and a 15-year agreement with ENI for the supply of an LNG cargo every month at a price of 11.5% and 12% of Brent Crude oil respectively. Last week, GUNVOR and ENI excused PLL from supplying LNG cargoes to Pakistan in November. This is the first time GUNVOR has defaulted on its agreement with PLL. It claimed that it was facing a system breakdown at the loading port that caused it to back out on supplying term LNG cargo to PLL. On the other hand, ENI has pulled out of its agreement with PLL for the third time. It first defaulted in January 2021 by providing half of the term cargo. It then failed to supply a term cargo in August and now it has backed out of its term cargo that was due in November. Although ENI claimed that it was grappling with logistic issues that caused it to back out from supplying an LNG cargo in November, history bears witness that it has always sold the term cargoes meant for PLL in the spot market whenever LNG prices went up in the international market. PLL is currently in talks with both companies to resolve the issue. In case these two trading companies fail to respect their agreements, PLL can impose a penalty of 30% of the contractual price of one cargo to each trading company.