Pakistan defers LNG contract with Qatar for a year, petroleum minister says
Pakistan has deferred an agreement to buy liquefied natural gas from Qatar for a year, Petroleum Minister Musadik Malik said on Wednesday, and will now receive the contracted LNG cargoes in 2026 instead of 2025. “We currently have a surplus of LNG, so we are not importing any new cargo,” said Malik. There were no financial penalties for deferring, rather than cancelling, the order, he added. Annual power use in Pakistan, which gets over a third of its electricity from natural gas, has fallen 8-10% year-on-year over the past three quarters, its power minister told Reuters in November, primarily due to higher tariffs curbing household consumption. The South Asian nation has deferred five LNG cargoes from Qatar and is negotiating to defer five more with other markets, Malik told journalists, without disclosing the names of the sellers. The government said in November it was slashing its electricity tariffs over the winter to boost consumption and cut the use of natural gas for heating. Many power utilities in Pakistan have had to curtail or even halt operations in winter months due to demand dropping by up to 60% from peak summer levels. Malik told Reuters in June that Pakistan was unlikely to buy LNG cargoes on the spot market until at least the beginning of winter in November due to oversupply and high prices. Pakistan, which last bought a spot LNG cargo in late 2023, cancelled its spot LNG tender for delivery in January owing to oversupply and a lack of buyers in Pakistan at spot prices. Malik also denied local media reports that Pakistan was closing a deal to import one cargo of crude oil from Russia each month from January. He said his government had restarted talks with Russia and was looking to solve obstacles such as “insurance, reinsurance, deal structure, shipping lines and ship cargo size”, but had not concluded a deal. The previous caretaker government had decided not to pursue a government-to-government agreement with Russia, allowing the private sector to step in, Malik said. Pakistan signed a deal with Russia in 2023 to import crude oil for local refining, which included a 100,000 metric ton shipment to state-owned Pakistan Refinery Limited. Under that arrangement, Pakistan paid for the crude at a discounted rate using Chinese yIan
Why Gas Markets Aren’t Scared of Mideast Conflict Right Now
U.S. natural gas futures dropped to $3.08/MMBtu on Tuesday, their lowest in over a week, after surging 20% in November. Gas prices have declined amid forecasts of milder weather in mid-December, following a brief cold spell that had driven earlier gains. Utilities have stopped drawing heavily from storage, despite colder-than-usual weather recently boosting consumption. Meanwhile, U.S. gas production clocked in at a robust 101.5 billion cubic feet per day in November, but below last year’s peak of 105.3 bcfd. In contrast, European natural gas futures climbed to €48.7 per megawatt-hour, close to their one-year high, as colder weather is forecast to spread across the continent, increasing heating demand. Temperatures in western Europe are set to drop, adding pressure to fast-depleting gas reserves, with gas stores only 85% full compared to 95% a year ago. Further, there are growing concerns over supply risks, including the upcoming expiration of a key gas transit deal between Russia and Ukraine. The Middle East conflict has so far not significantly impacted global oil and gas flows, reflecting the marginality of Eastern Mediterranean gas on world markets, even as more cracks appear in the ongoing ceasefire between Israel and Hezbollah. On Monday, Hezbollah fired into a disputed border zone held by Israel, with Lebanon’s parliament speaker claiming that Israel has committed 54 breaches of the ceasefire. However, Israel’s energy sector is bound to benefit from the ceasefire by encouraging foreign contractors to return to the country’s offshore and resume key gas expansion projects. U.S. major Chevron Corp. (NYSE:CVX), operator of both Israel’s key gas fields, 23 tcf Leviathan and 14tcf Tamar, put expansion projects at both on hold due to the conflict. The expansion of both gas fields had originally been due for completion by mid-2025. The expansion will increase Israel’s gas exports to Egypt by a reported 6bn cubic feet per year. Back in February, Chevron approved a US$24 million investment to boost gas production at the Israeli?Tamar offshore gas field. Israel–one of the main gas exporters in the region–temporarily suspended some exports in the immediate aftermath of the war but managed to return to normal production quickly. The biggest disruption to Israel’s energy sector has been the suspension of the British Petroleum (NYSE:BP)–Abu Dhabi National Oil Company (BP-Adnoc) bid to acquire a 50% stake in Israeli gas producer?NewMed Energy (OTCPK:DKDRF) for US$2bn. NewMed Energy is the majority shareholder and main operator of the giant Leviathan Natural Gas Field with a 45.3% working interest, while Chevron Corp and Ratio Oil Corp. have a 39.7% and 15% stake, respectively. The deal was first thrown into question after an independent panel appointed by NewMed recommended raising the asking price by 10%-12%, or as much as ~$250M, which might seem like a stretch considering back then the company had a market cap of $2.9B and $87 million in cash but $1.73B in debt. Meanwhile, reports emerged that executives at BP and Adnoc were anticipating further delays on the deal until the political situation improves. Experts are worried that a surge in civilian casualties could make it politically untenable for the companies to proceed, with the death toll in Gaza already approaching 50,000, mostly civilians. NewMed and its two partners discovered the Leviathan Natural Gas Field in the Levant Basin Province in 2010. The gas field straddles the sea borders of Israel, Lebanon, Palestine, the Republic of Cyprus and the Turkish Republic of Northern Cyprus. With 22.9 trillion cubic feet of recoverable gas, Leviathan is the largest natural gas reservoir in the Mediterranean and one of the largest producing assets in the region. Lebanon’s Gas Quest Could Go Bust But the NewMed takeover is not the only energy project that has been disrupted by the Israel-Hamas war. Last year, French energy group TotalEnergies (NYSE:TTE) set the first drilling rig at its location in the Mediterranean Sea off Lebanon’s coast near Israel’s border with the country looking to commence operations in search for gas. The cash-strapped nation hoped that future gas sales could help the country pull out of its deep financial crisis that has seen the local currency lose more than 98% of its value. “The arrival of the equipment marks an important step in the preparation of the drilling of the exploration well in Block 9, which will begin towards the end of August 2023,” TotalEnergies said in a statement. TotalEnergies leads a consortium of energy companies working on the offshore project, which includes Italian oil and gas giant Eni S.p.A. (NYSE:E) as well as state-owned QatarEnergy. The drilling operations came after a landmark U.S.-brokered agreement that saw Lebanon and Israel establish a maritime border for the first time ever. Previously, Lebanon’s Energy Minister Walid Fayad said they hoped to determine whether the exploratory block has recoverable gas reserves by the end of the current year. Unfortunately, the ongoing war is very likely to make cooperation between the two countries almost impossible, with Lebanon being home to Israel’s arch-enemy, Hezbollah.
Oil Prices Predicted to Plummet Below $60 Under Trump
A new survey from law firm Haynes Boone LLC has revealed that banks are gearing up for oil prices to fall below $60 a barrel by the middle of President-elect Donald Trump’s new term, Bloomberg reported on Monday. The survey of 26 bankers showed that they expect WTI prices to drop to $58.62 a barrel by 2027, more than $10 lower than the intraday price of $69.87 at 11.00 am ET on Wednesday. Trump says he’ll push shale producers to ramp up output, even if it means operators “drill themselves out of business.” However, it’s not clear he intends to accomplish this feat since U.S. oil is produced by independent companies and not a national oil company (NOC). Exxon Mobil’s (NYSE:XOM) Upstream President Liam Mallon recently dismissed the notion that U.S. producers will dramatically increase output under a second Trump term. “I think a radical change is unlikely because the vast majority, if not everybody, is primarily focused on the economics of what they’re doing,” Mallon said last week at a conference in London. Meanwhile, StanChart notes that following Scott Bessent’s recent nomination as Treasury Secretary, his Manhattan Institute June session where he spoke at a conference entitled ‘Towards a New Supply-Side: The Future of Free Enterprise in the United States’ is being scrutinised as a potential guide to policy. The commodity analysts point out that U.S. oil and gas output is currently ~40.7 mboe/d; U.S. oil and gas output has grown by an average of about 123 kboe/d per month since 2015, meaning adding 3 mboe/d would take less than 25 months. The commodity experts have noted that 41% of the post-2015 increase has come from natural gas, 28% from natural gas liquids (NGLs) and just 28% from crude oil. StanChart has predicted that the crude oil element of the next 3 mboe/d increase is likely to be significantly less than 20%, with natural gas likely to be the main instrument for meeting the new administration’s energy goals as crude oil output growth becomes increasingly difficult. Recently, Morgan Stanley predicted that the U.S. natural gas market is poised to enter a new cycle of demand growth thanks to surging LNG exports and rising electricity demand.