LNG imports at high prices cause Rs10b loss

Business Desk
ISLAMABAD: Pakistan has borne a loss of over Rs10 billion due to mismanagement in the import of liquefied natural gas (LNG) cargoes that led to the purchase of expensive fuel, noted the Auditor General of Pakistan in its report. According to Rule 4 of the Public Procurement Regulatory Authority (PPRA) Rules 2004, procuring agencies, while engaging in procurements, shall ensure that the procurements are conducted in a fair and transparent manner, the object of procurement brings value for money and the procurement process is efficient and economical.
During the audit of Pakistan LNG Limited (PLL) accounts for financial year 2020-21, the auditors observed that the management awarded spot cargo contracts at higher prices for delivery in July, September and October 2021.
PLL management floated two tenders on May 21 and June 5, 2021 for the spot purchase of LNG and delivery in July 2021. According to the bid evaluation reports dated June 2 and June 8, 2021, Trafigura and Vitol Bahrain offered prices of $11.7747, $11.6612 and $12.7777 per million British thermal units (mmbtu) for delivery windows of July 8-9 and July 12-13, 2021 respectively.
However, the PLL board of directors cancelled the bidding process, considering the price exorbitant that was predicted due to an unprecedented increase in the global LNG demand and the JKM (Japan Korea Maker) market benchmark.
In contrast with its earlier observation, the board reduced the lead time for LNG procurement.
In order to meet consumer demand, the management again floated two tenders on June 17 and June 24, 2021 and awarded contracts for spot cargoes to QP Trading and Vitol Bahrain at higher rates of $11.97 and $13.45 per mmbtu for the same delivery windows. It resulted in an excess cost of Rs983.215 million.
Similarly, a tender for the spot purchase of LNG and delivery in September was floated on June 19, 2021. According to the bid evaluation report dated July 6, 2021, Qatar Petroleum and Total Gas and Power quoted prices of $13.7875 and $14.6721 per mmbtu for the delivery windows of September 16-17 and September 26-27, 2021.
However, the PLL board cancelled the bidding process, considering the downward trend in LNG prices in the international market. In contrast with its earlier observation, it reduced the lead time for LNG procurement.