The government has renewed efforts to import liquefied natural gas (LNG) with new spot tenders floated after almost a year. The move comes just as a new agreement was reached with Azerbaijan to import about one LNG shipment a month. Details about quantity and price were not provided in the initial announcement, but the price is reportedly “cheaper” than the current supply, which is almost all coming from Qatar. The renewed interest in LNG comes as global prices have begun to normalise after speculators pushed them to inexplicable levels in the aftermath of Russia’s invasion of Ukraine last year. After peaking at over $70 per million British thermal units in August 2022, prices are now below $10 for the same amount. Incidentally, the highest price Pakistan ever accepted was $30.65 in a November 2021 deal.
Pakistan is highly dependent on gas to operate power plants, fuel cars, and for other industrial and domestic uses, and has been taking hits on all these fronts due to gas shortages created by the price bomb and the government’s disinclination to pay through the nose when prices were peaking. Dependent on gas for power generation and running short of foreign exchange to pay for imports, the country has struggled to procure spot cargoes of LNG after global prices spiked last year following Russia’s invasion of Ukraine, leaving it to face widespread power outages. In fact, despite the domestic gas shortages, Pakistan’s LNG imports actually fell almost 16% last year, largely due to the unaffordably high import price.
Pakistan has been unable to insulate itself against price volatility in the international market for several reasons, including the cash crunch, which keeps us — and sellers — from agreeing to long-term deals, leaving us to gamble with the higher risk of spot tenders. While recent deals such as the one with Azerbaijan have aimed to address this gap, ensuring a steady supply of natural gas is going to be critical for the country to ensure economic recovery.
Published in The Express Tribune, June 15th, 2023.
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