LNG Shortage


The price of LNG has soared to all-time highs as a result of the global shortages. The sole but most expensive offer that the state-owned LNG Ltd ever got in response to a tender for four LNG cargoes for delivery in July was rejected last week. If Pakistan hadn’t rejected it, Qatar’s offer of an LNG cargo at slightly under $40/mmBtu would have been the most expensive. Pakistan’s most costly cargo purchase to far was $30.65/mmBtu in November 2021. 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 several 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. 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 study claims that despite the majority of cargoes coming from more affordable long-term contracts with Qatar due to pricey spot purchases by the current administration in April to meet the need for power, LNG prices in Pakistan have already increased by 40% in recent months. Therefore, it was wise to refuse the most expensive LNG shipment. Due to the current supply shortages, wealthy countries like Germany are already considering rolling back their promise to stop funding for abroad fossil fuel projects to reverse their strategy for combating global warming. Even if Pakistan can resolve its balance of payments issue and acquire money to pay for energy imports, it may still have trouble obtaining LNG because it is not widely available. Due to the impending winter supply gap, a plan must be developed to limit gas waste and ration fuel while it is still practical.

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