Pakistan's gas crisis will likely continue with the Dubai-based Emirates National Oil Company (ENOC) backing out of its commitment to provide LNG cargo.

As per reported, the Emirati company had won an LNG cargo contract for delivery on February 23-24 with the lowest bid at 23.4331% of Brent (equal to $11.70 per MMBTU) but in the latest communication the company said it would not be able to provide the LNG cargo to Pakistan.

The Dubai-based company's failure to honour its commitment has come as a major blow to the federal government with the Petroleum Division in a state of shock as the development will exacerbate the gas crisis in the country.

Moreover the privy to the development told The News that the cost of LNG in dollar per MMBTU in the open market has soared by over 100% and the government suspects ENPC has sold the LNG cargo meant for Pakistan to another country or party at an expensive rate. The ENOC will lose its bid bond of $300,000, said the source.

Industrial sources also confirmed to The News that the LNG process has jacked up in the open market manifold.

“The S&P Global Platts JKM for February was assessed at a record high of $32.494/MMBTU on January 12. This is the highest for the LNG benchmark for Asian spot LNG since it was launched in early 2009. The current Brent crude price in MMBTU is around $9.7/MMBTU at a conversion rate of 5.8 MMBtu per barrel,” they said.

Furthermore, Petroleum Division said ENOC has backed out of its lowest bid but the development would not heighten the gas crisis in the country as around eight cargos have been arranged for February supply.

Official sources conveyed that the PPRA rules were responsible for "this ugly situation" to some extent because after the opening of bids on December 28, 2020, the authorities remained silent for 10 days then asked the LNG suppliers to provide the LNG vessel.

According to the sources, Pakistan received bids in the range of $10.7 to $11.7 per MMBTU for two LNG cargoes for the month of February

Most importantly, under the PPRA rules, the PLL is bound to make bid prices public while other countries do not have such a mechanism and deem keeping prices secret a strategy.

The source said that after the bid was made public, other players may have approached ENOC with a better offer which is why it may have preferred losing the $300,000 bid bond.

“This means, the ENOC has gone for big profit out of LNG cargo which is why it did not care about losing the amount of bid bond," he said. “Every LNG trading company has to deposit the bid bond of $300,000 which can be captured if any LNG supplier after winning the contract does not provide the LNG vessel.”

However, the authorities were "confused" whether the other LNG trading company, SOCAR from Azerbaijan, was committed to its bid to provide LNG cargo slated for delivery on February 15-16.

Meanwhile, the Azerbaijan company may also back out from the deal considering the price hike in the open market. Sources also mentioned that LNG supplier Vitol had also defaulted in December 2020 by providing half of the cargo instead of a full vessel to Pakistan.

But Petroleum Division insisted that SOCAR will not withdraw of its lowest bid.