Pakistan Gasport seeks spot LNG cargo

Pakistan Gasport is looking to buy a spot liquefied natural gas (LNG) cargo for November delivery, its chairman Iqbal Ahmed told Reuters on Thursday. This would be the country's first spot LNG deal since June 2022.

The south Asian country, facing a severe economic and foreign exchange crisis, has struggled to purchase the super-chilled fueled following a surge in prices after Russia's invasion of Ukraine last year.

LNG is crucial for Pakistan, where natural gas accounts for over a third of power generation and local gas reserves are insufficient to address growing electricity demand in a country of over 230 million, leading to frequent power cuts.

Pakistan Gasport is evaluating interest for a cargo from sellers in Oman, the United States and the United Arab Emirates, Ahmed said.

"We've got different countries which have offered us different options. We are extremely encouraged by what we've heard today," Ahmed told Reuters.

Pakistan Gasport owns the country's largest LNG import and regasification terminal at Port Qasim, but LNG imports have historically been facilitated by Pakistan LNG, a state-run firm that last bought a spot cargo in June 2022 from PetroChina.

A cargo would be the first shipped in by a private sector company in Pakistan, said Ahmed, who expects LNG prices to fall in coming years, making spot purchases more attractive.

Ahmed said 12% to the Brent slope was the "price to beat" for a cargo to Pakistan. That works out to nearly US$11 per mmbtu, a discount of a sixth to current average Asian LNG prices of US$13.

"If the government or anybody else can bring LNG at a price of 12% of Brent or lower, there is a market. The minute you cross that barrier, there is resentment," he said.

Ahmed said he expects Pakistan's LNG demand to grow to 30 million metric tons in 5 years, from about 10-12 million tons now.

Importers of all commodities to Pakistan have faced increased financing costs and higher processing times due to the ongoing economic and foreign exchange crisis. LNG traders have said sellers to Pakistan could demand a premium because of the country's low credit rating.

Pakistan Gasport plans to avert such challenges by not seeking a letter of credit from banks, financing the deal with internal funds, Ahmed said.

"I plan to use a currency other than the dollar to facilitate the payment and also use a semi-barter system to settle," he said.

 

Iran supplying electricity to Pakistan, despite domestic shortage

According to a Dawn newspaper report, Federal Minister for Energy Hammad Azhar thanked the Iranian ambassador to Pakistan on Friday for “normalizing” electricity supply to the bordering districts of Baluchistan.

“I am grateful to the Ambassador of Iran in Pakistan for promptly accepting my request and normalizing the flow of electricity to the Makran division,” he said in a tweet.

Gwadar, Turbat and Makran have been facing extensive power cuts for more than a week. These areas are not part of the national grid and, therefore, rely on electricity imported from Iran. The neighbouring country curtailed electricity supply as it faces a shortage of hydel power generation.

 “In the meanwhile, we are also bringing forward the timelines of the project that seeks to connect these areas to the national grid,” said Azhar.

A local source told Dawn that electricity supply from Iran hasn’t been restored fully as many affected areas continue to face hours-long power outages.

Pakistan imported 514GWh from Iran in 2019-20, which was less than 0.4 per cent of the country’s total electricity generation in the same year, according to the power regulator.

The country’s electricity generation capacity exceeds demand as the last government commissioned new power plants of almost 7,000MW in its five-year term. However, vast areas in Baluchistan still remain disconnected from the national transmission network. Azhar has vowed that these areas will be connected to the national grid within two years.

Earlier, in a conversation with Dawn, independent energy consultant Najam ul Hassan Farooqi said the recurring problem can only be solved once the 300MW imported coal-based power plant currently under construction in Gwadar comes online.

 “It’ll take at least three years to set up a 700-kilometre transmission line from Gwadar to Karachi,” he added.

One of the major reasons is the “procedural delay” in the allocation of gas to Habibullah Coastal Power, a 140MW gas-based power plant located near Quetta.

The only power plant in the area sufficient to meet the local demand stopped producing electricity in September 2019 when its gas supply agreement with the government-owned Sui Southern Gas Company expired after 20 years.

The company’s power purchase agreement, however, is valid until 2029. Its validity was pegged with the reallocation of gas. The plant has been shut for 21 months as the formal summary has yet to be moved to the Economic Coordination Committee (ECC) for the allocation of gas.

Pakistan Stock Market Remains Lackluster

Trading at Pakistan Stock Exchange remained lackluster evident from benchmark index sliding by 1.7%WoW and closing the week at 48,156 points. The average daily trading volume also declined by 3.5%WoW to 248.7 million shares.The lack of investors’ interest can be attributed to political volatility and absence of market triggers. News flows for the week included: 1) SECP in its press release dated 29th March apprised that its constituted committee (for reviewing in‐house financing) had submitted a report which focused on introducing reforms in Margin Financing (MFS) to improve banks' funding to investors through brokers, 2) GoP released total Rs505 billion (63% of total Rs800 billion allocated) inclusive of Rs122 billion from foreign aid, 3) GoP allowed PTA to auction a next generation mobile services (NGMS) license with a base price of US$295 million from the frequency spectrums left unsold in the previous two auctions, 4) NML announced selling of 40% stake of its auto assembling business to the Japanese giant Sojitz Corporation and 5) OGRA proposed an increase of POL products for April. Stocks leading the bourse include: SHEL, MTL, ASTL and MEBL, whereas laggards were: HASCOL, AKBL, KEL, NML. Volume leaders were: BOP, ANL, KEL and ASL. Headline inflation is expected to guide expectations for monetary policy and may trigger a rally in banks. Additionally, the much awaited outcome of Panama case hearings could alleviate political pressures.

Circular debt and overdue receivables remain a usual element in cash strapped liquidity dynamics for the power sector. Taking a comprehensive approach, AKD Securities map the timeline of developments and quantum of circular debt build up since the one‐time clearance of Rs480 billion in June 2013. Its analysis show that in a large number of cases the GoP has been asked by independent arbitrators (foreign and domestic) and high courts to clear the pile‐up. This perception gains further strength based on increasing reliance on IPPs in power generation mix particularly in the backdrop of 10,663MW of gross capacity additions coming online by CY20. Also, with its political agenda hinging on resolving the prevailing power deficit of over 5,000MW, it is believed that a limited clearance of overdue payables to them is more likely. The Rs48 billion being claimed by 13 IPPs currently is a minor hiccup whereas IPPs with planned CAPEX outlays have increased pressure to free up liquidity tied in GoP receivables (case in point being HUBC where the room for leverage falls from Rs71.7 billion in FY16 to Rs27.8 billion in 1QFY17 and Rs1.8bn in 2QFY17).

Inconsistent with previous month's improved performance, Pakistan’s exports remained lackluster in February 2017, declining by 8.0%MoM/8.6%YoY to US$1.64 billion. Total exports registered a decline across all segments, with highest impact coming from the heavyweight Food and Textile sectors amounting to US$318.9 million and US$995.3 million, sliding 12.7% MoM/24.6%YoY and 6.5%MoM/2.7%YoY respectively. On a cumulative basis, 8MFY17 textile exports were 1.6%YoY lower at US$8.23 billion, largely contributed by 9.2%YoY decline in the low value segment diluting the impact of 1.6%YoY growth in the value added segment. Contrary to expectations, inclusion in zero rated regime and recently announced export incentive package worth Rs180 billion (textile sector's share estimated at close to 90%) has so far failed in generating positive momentum in export trend, giving way to fresh concerns regarding the export‐oriented industry's competitiveness over regional players. Going forward, analysts expect textile exports to remain under pressure due to: 1) weak Chinese demand outlook and concerns of economic slowdown in the European Union following Brexit and 2) lack of currency competitiveness. Moreover, continuous rise in international and local cotton prices has also aggravated concerns about textile industry.

ASTL has recently raised its re‐bars prices per ton by Rs2,000 (up 2.5%) to Rs79,000 likely due to: 1) increase in scrap steel prices and 2) rise in Chinese re‐bar prices due to higher domestic demand as a result of improvement in Chinese property sector and continuous decline in steel production. The recent price increase is likely to improve the bottom line. That said, current re‐bar prices still remain below FY16 average of Rs83,000/ton resulting in reduced gross margin/earnings for FY17F. While the upcoming expansion is to aid earnings growth, analysts believe the current price level is already reflects that.