WINTER is on its way, with a massive gas crunch looming as elevated global LNG prices have eroded the cash-strapped government’s ability to make spot purchases of the imported fuel to fill the growing supply gaps in dwindling domestic stocks. Will this be a harsher winter than the last one? Probably yes — despite the expected addition of 1,320MW of fresh electricity generation from Thar coal in the next couple of months. With just eight LNG cargoes a month available — thanks to cheaper long-term contracts with Qatar — against a requirement of 12 vessels, the two public-sector gas utilities will be compelled to ration the fuel for cooking, heating and industry as temperatures start to drop in the country. Short of dollars, Pakistan was pushed out of the spot market almost a year ago as LNG prices surged to record highs, and short-term international suppliers started to default on their (cheaper contracted) commitments to make quick money on rising European demand. The Russian invasion of Ukraine earlier this year exacerbated the supply situation for Pakistan that was already strapped for foreign exchange when Moscow drastically cut its gas exports to Europe, further disrupting the market. In July, Islamabad did not receive a single bid in response to a tender floated to import 10 cargoes. The authorities have now invited bids for securing 72 cargoes from international suppliers over a period of six years. But few expect a favourable response due to the current price volatility, which is unlikely to abate anytime soon after the damage done to the gas pipeline transporting Russian gas to Germany in a suspected act of sabotage. European gas prices rose by 12pc on Tuesday following damage to the Nord Stream pipeline.
A gas crunch in winter has been a permanent part of life in Pakistan for over a decade, with no significant new discovery amid exhausted domestic reserves. With the spot LNG market effectively out of reach of Pakistan owing to the country’s balance-of-payments troubles and soaring international prices, the next few winters are going to be tougher for gas users — domestic and industrial both — unless Islamabad is able to conjure up enough spare dollars to buy expensive spot cargoes. That will impose large costs on the economy. The situation demands that the government chalk out an effective energy conservation plan to survive this difficult period. If rich countries like Germany are doing so, why can’t we?
Published in Dawn, September 29th, 2022