Key Takeaways
- Sui Northern Gas Pipelines Ltd (SNGPL) has declared force majeure for three weeks.
- This affects over 5,000MW of RLNG-based plants in Punjab.
- The government may increase reliance on the expensive spot market to mitigate shortages.
ISLAMABAD: Sui Northern Gas Pipelines Ltd (SNGPL) has declared force majeure for its inability to supply regasified liquefied natural gas (RLNG) due to renewed tensions around the Strait of Hormuz. This decision, effective from July 14 to August 3, is expected to significantly impact power generation in Punjab.
In a letter to four RLNG-based power plants in Punjab, SNGPL cited Pakistan State Oil (PSO) that 'the event of force majeure notified due to ongoing war in the Gulf region remains in effect and continues to prevent the performance of its supplier’s obligations under their LNG Sale and Purchase Agreements (SPAs).'
According to SNGPL, Qatar Energy, the supplier, is initiating a progressive resumption of operations based on regional safety assessments. However, the availability of safe transit through the Strait of Hormuz remains intermittent and limited.
The government may have to increase its dependence on the spot market for fuel, which could lead to higher costs. Informed officials stated that while rationing from already imported cargoes can help mitigate shortages, this is not a long-term solution.
SNGPL’s ability to perform its obligations under the Gas Supply Agreement (GSA) signed on October 29, 2016, including supply of RLNG and compliance with gas specifications, remains materially and adversely affected. The company noted that LNG supply continues to be disrupted due to circumstances beyond its reasonable control.
The situation arising from the force majeure event and surrounding circumstances remain highly uncertain. SNGPL is monitoring the situation and coordinating with PSO to manage the impact on RLNG supplies and related operational effects.
In a statement, SNGPL said, 'Accordingly, the event of force majeure previously notified continues under Article 13 of the GSA and SNGPL is relieved from its performance obligations to the extent and for the duration that such force majeure Event or its effects continue in accordance with.'
'the event of force majeure notified due to ongoing war in the Gulf region remains in effect and continues to prevent the performance of its supplier’s obligations under their LNG Sale and Purchase Agreements (SPAs).'
Pakistan State Oil (PSO), Not specified
'Accordingly, the event of force majeure previously notified continues under Article 13 of the GSA and SNGPL is relieved from its performance obligations to the extent and for the duration that such force majeure Event or its effects continue in accordance with.'
Sui Northern Gas Pipelines Ltd (SNGPL), Not specified
