LNG emergency

Published July 5, 2022

PAKISTAN is looking to buy a lot of LNG amid ongoing countrywide blackouts. The government has just released one of its biggest LNG purchase tenders ever to procure 10 cargoes for delivery through September. Even if its tenders get a response from the international suppliers — considering a restricted LNG market because of the Russia-Ukraine conflict — it will cost Islamabad around $1bn to purchase all those cargoes at current spot market rates. The problem is that it does not have sufficient cash at the moment to buy even a single cargo at present prices.

Read: Pakistan losing LNG bidding war to Europe

In the last two months, the government has thrice tried to procure LNG for July delivery. Only one supplier responded the last time, asking the highest-ever price of just below $40mmBtu. The authorities rejected the offer since it was not affordable.

No wonder the coalition government has approached Qatar, one of the world’s largest LNG suppliers with whom Pakistan has had two long-term contracts, for additional shipments of 400mmcf to 500mmcf a month on ‘deferred’ payments to curb the growing power outages in the country.

But the Qatari authorities do not appear enthusiastic about the request due to the massive demand for its gas from Europe as well as owing to Pakistan’s failure to remove bureaucratic impediments to the establishment of a merchant LNG terminal near Karachi.

Read: Does LNG hold the key to Pakistan's energy woes?

In order to appease Doha, the minister of state for petroleum, Musadik Malik, has again written to Qatar, expressing Pakistan’s “desire to enhance the number of cargoes of LNG from Qatar under the two existing long-term sale purchase agreements on deferred payments”. At the same time, he has sought to reassure Doha that “the government in Islamabad is diligently working to do away with the stumbling blocks ... to accelerate the process of investment by Qatar Energy in infrastructure development for LNG import”. Will that be enough for Doha to commit more gas to Pakistan at a time it can sell it to any one for cash?

That’s not the only issue the government has to deal with while ramping up LNG supplies. The absence of adequate infrastructure to handle additional gas could also be a problem, which can be tackled in a few months by allowing existing terminals to expand their re-gasification capacity now and removing bureaucratic hurdles in the way of the construction of new ones on a business-to-business model without any government guarantees involved.

Published in Dawn, July 5th, 2022

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