ISLAMABAD: Pakistan LNG Limited (PLL) has sought over Rs 150 billion from government to ensure procurement of LNG spot cargoes for the power sector as the company is facing a liquidity crunch, sources close to Secretary Petroleum told Business Recorder.
Sharing the details, sources said, M/s PLL currently has a long-term LNG supply contract with M/s Eni S.P.A for supply of 1 cargo per month. Teminal-2 is used to re-gasify the said cargo and another LNG cargo under the Qatar Energy SPA.
For the remaining capacity of Terminal-2, PLL floats tenders in the international market for the procurement of LNG cargoes on spot basis, to maintain regular supplies to power, fertilizer, export and other sectors.
PLL was extended a government of Pakistan (GoP) guarantee of USD 150 million for import of LNG cargoes in 2017, with the guarantee amount able to accommodate 6 LNG cargoes at $ 25 million each. Due to Russia-Ukraine situation, the current prices of spot LNG cargoes are hovering around $ 100 million.
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Given the current market rates, the GoP guarantee is not sufficient to cover even 02 cargoes. PLL has arranged LC facilities from commercial banks to meet its growing requirements and has so far been able to efficiently meet LNG demand. However, the current market rates have exhausted PLL’s LC lines and PLL is unable to import 5 to 6 cargoes per month.
PLL’s liquidity position has been further aggravated due to non-payment of dues by SNGPL to PLL. PLL’s current receivables from SNGPL stand at Rs138.3 billion (including LPS of Rs20.3 billion). These receivables have accumulated due to a number of reasons such as diversion of RLNG to domestic sector, delay in release of subsidy against RLNG supply to exports and fertilizer sector and considerable amount (Rs64 billion) not paid by the power sector.
Given the acute shortage of natural gas in the country and increased requirement from Power Division for electricity generation, PLL has planned following 18 firm LNG spot cargoes procurement from May to September 2022: (i) May- 4 cargoes, (ii) June- 3;(iii) July -3;(iv) August -5; and (v) September -3.
In light of requirement plan, PLL has recently awarded three spot cargoes for May and one for June 2022. PLL will require Rs93.6 billion to pay for these cargoes and if the amount is not made available, PLL will not be able to ensure timely payment to international suppliers.
PLL is also floating an additional tender for another three spot cargoes (one in May and two in June) to meet the RLNG requirement of power sector. However, for such procurement, the Company does not have sufficient credit lines to open LCs. In the event these cargoes are awarded, PLL will require an additional Rs 56.6 billion. Resultantly, PLL’s requirement for payment against cargoes during May, June and July 2022 will be Rs 31 billion, Rs102 billion and Rs17.5 billion, respectively.
In case these additional cargoes are not arranged, RLNG supplies to power sector will be curtailed and alternative fuel (RFO) supply arrangements will have to be made.
In view of existing situation, following proposals have been submitted for consideration of government: (i) in order to enable PLL to issue LCs for additional spot LNG cargoes, the GoP guarantee in favour of PLL may be enhanced by $ 200 million (to a total of $350 million). In case the GoP guarantee cannot be enhanced, PLL may be Rs 25 billion for opening of LCs against cash liens (remaining requirement of Rs 12 billion is available with PLL through LC lines from another commercial bank). Power Division may provide this amount against SNGPL’s receivables in addition to normal remittance;(ii) to enable PLL to pay for LNG cargoes already awarded for May and June 2022, Rs 93.6 billion may be paid by Power Division as per schedule in a timely manner and if the requisite funds are not received as per schedule, PLL will not be able to ensure timely payment to international suppliers which will have severe repercussions on the entire LNG supply chain; and (iii) to enable PLL to award additional three cargoes under tendering process for May and June 2022, Power Division may confirm timely availability/ payment of Rs56.6 billion before these cargoes are awarded by PLL.
Copyright Business Recorder, 2022
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