Complexities of LNG – spot vs long-term pricing
This reminds me of a meeting I had in a country that has a lot of gas but no LNG liquefaction. I represented a client, and we were in preliminary talks for purchasing gas when the sellers representative told us that Japan pays much more than we are offering for the gas. My only answer was that they should bring the gas to Japan then. LNG (and you must really have LNG then which they did not) is still not a commodity. So, forget what happens somewhere else. Pakistan is not Japan – sellers will have a very different view in terms of credit, volumes, reliability of payments and so forth. Pakistanis want Japanese prices – fine. Then be a reliable, very creditworthy customer like Japan is. That’s not what you want to offer – then the deal is going to reflect that.
Pakistan imported 6.7 million tons of LNG in 2018. Traditionally, furnace oil consumption has been nine million tons per year, which has come down to 4.2 million tons.
