ISLAMABAD: Pakistan has assured international LNG suppliers of timely payments for their spot cargoes over the next six years through standby letters of credit (SBLCs) to top-ranking international banks.

The state-run Pakistan LNG Limited (PLL) has given the assurance to international bidders, seeking 72 cargoes over the next six years (2023-28) at the rate of one cargo per month.

The company floated tenders on Aug 6 with a bidding deadline of Sept 13. However, international firms sought payment assurances or sovereign guarantees because of prevailing balance-of-payments challenges.

“The PLL will issue an SBLC from a scheduled bank with a long-term credit rating of at least AA from Pacra/JCR-VIS or equivalent from a reputable international credit rating agency … PLL may issue an SBLC through United Bank Limited (UBL),” the company said, asking the bidders to also seek confirmation of the SBLC through top international banks, namely JP Morgan, Citi Bank and Deutsche Bank but declined to provide a sovereign guarantee from the finance ministry.

PLL seeks 72 cargoes over six years

The company has also explained that bidders under the eligibility criteria could provide documentary evidence in the form of a supporting letter from an LNG supplier or producer, clearly stating that the supply of at least one million tonnes per year of LNG from 2023 to 2028 was available to the relevant entity for delivery to Pakistan under the tender.

This must be supported by a copy of the bill of lading, the final discharge report or other similar document proving LNG cargo delivery to confirm that the bidder was a supplier. However, the PLL has declined to make any changes to wider LNG specifications, including higher gross heating values or higher ethane content other than those sought in the tender.

It also turned down suggestions to accept bids in pricing benchmarks other than linked to Brent, different sizes of cargoes or any offer for less than 72 cargoes spread over six years, or one cargo per month. The delivery period for these 72 cargoes is also inflexible starting with January 2023 and ending December 2028.

Pakistan has not been able to secure any spot cargo over the past few months as international prices surged beyond expectations following the Ukraine-Russia war that forced Europe to switch its gas supplies mostly from the international spot market to make up for energy shortages owing to Russian gas disruptions.

Under the two-part tender, PLL has invited bids for 12 cargoes for the first year (January-December 2023) and then 60 cargoes for the next five years, starting January 2024 and until December 2028.

Published in Dawn, August 29th, 2022

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