PSO rebuffs media reports of cancelling LNG cargo supply contract

ISLAMABAD, (APP):Pakistan State Oil (PSO) on Sunday vehemently rebuffed certain media reports about dropping or cancelling long term liquefied natural gas (LNG) supply contract.
A spokesman of national flag bearer said in a statement that PSO had not cancelled or dropped the long term cargo supply contract in September.
PSO was committed to safeguard national interest, leaving no stone unturned to fuel country’s progress.
The bids received against the required deliveries in September 2021 were yet to be awarded as those would be presented to PSO’s board of management along with the supply/demand situation and global price trends as required in a set procedure. The decision would be made accordingly after evaluating all aspects.
Commenting about the timing of the tenders, he said awarding cargoes ahead of required delivery windows or awarding a strip of cargoes in one go does not suit PSO since the company has certain contractual flexibilities available under long term contracts and spot purchases were very few in a year.
Giving example, he said due to the unplanned dry dock activity of Floating Storage Regasification Unit (FSRU) in Jun-Jul and uncertain situation in September – considering scheduled FSRU replacement, had PSO warded July and September spot cargoes in advance, the company would have had to either drop much cheaper contractual cargo or face take or pay penalty. Therefore the contract would be finalized after carefully seeing the demand supply dynamics and market conditions.
Considering that 2021 has been exceptionally high LNG prices in international market, the planning and management of contract done by PSO would not only absorb the impact of higher spot prices but also result in potential savings.
PSO has enabled considerable savings through effective planning and contract management by reducing the number of spot cargoes from 12 to 6 this year using contractual flexibilities available while maximizing long term cargoes through contract from 60 to 70.
PSO has already devised an annual delivery plan (ADP) agreed with the stakeholders to meet the ever increasing gas demand in winter at the lowest possible rates, he said adding that four cargos were to be supplied under the long term contract in September and two spot deliveries were planned as per ADP.
PSO’s long term contract for 60 cargoes a year was not equally divided over 12 months.
PSO prudently planned winter (Jan-Feb and Nov-Dec) in advance when spot prices were usually higher, and arranged 28 cargoes instead of 20 under the long term contracts – 24 cargoes from the existing long term contract and 4 additional cargoes from the recently executed long term contract commencing in January 2022 by exercising contractual rights.