Over the coming weeks, Pakistan’s energy situation is expected to get worse as the country battles to find affordable LNG on a global market that has been severely impacted by the political repercussions of the Russia-Ukraine war.
The price of LNG has soared to all-time highs as a result of the global shortages.
In response to bidding for four LNG cargoes for delivery in July, the state-owned LNG Ltd this week rejected the lone, but most costly offer it had ever received.
If Pakistan hadn’t rejected it, Qatar’s offer of an LNG cargo at slightly under $40/mmBtu would have been the most expensive.
In November 2021, Pakistan paid $30.65/mmBtu for the most costly cargo it had ever bought.
This is Pakistan’s third failed attempt to purchase LNG cargoes for next month as it grapples with the possibility of a worsening of the country’s already widespread blackouts.
Three offers were submitted for the first two tenders, which were released in May and June but were discarded since none of them met the technical requirements.
Although the government claims to be in talks with a number of gas suppliers, notably Russia, to alleviate local shortages, it has so far been unable to secure any new agreements to reduce power outages amid rising electricity prices.
The rise in international energy prices has increased domestic power fuel costs by more than 100 percent. It was caused by Covid-related supply interruptions and made worse by Russia’s war in Ukraine.
To make up for part of the losses brought on by expensive fuel imports, the government intends to increase power rates by 47 percent starting in the next month.
A report claims that in recent months, LNG prices in Pakistan have already increased by 40%.
Despite the majority of the shipments coming from more affordable long-term contracts with Qatar, the current administration made pricey spot purchases in April to meet the need for power.
Therefore, it was wise to refuse the most expensive LNG shipment.
To read our blog on “Pakistan is considering LNG import agreements with countries such as Russia,” click here.
