Islamabad [Pakistan], July 1 (ANI): In a major setback to Pakistan's ongoing energy crisis, the country has failed to procure Liquefied Natural Gas (LNG) at an "affordable" price.
The highest-ever bid that Pakistan accepted since it started LNG imports in 2015 was at USD 30.65 per mm Btu in November 2021. The state-run Pakistan LNG Ltd (PLL) floated a tender on June 16 for four LNG cargos -- one each in the first and second weeks, and two in the last week, of July.
No bidder came up for July 2-3, July 8-9, and July 25-26 delivery windows. This was PLL's 'third' failed attempt to have an LNG cargo in the first week of July.
Qatar Energy, a state-owned petroleum company of Qatar, had offered an LNG shipment at USD 39.8 per million British Thermal Unit (mmBtu), which would have been the "priciest" purchase for Pakistan had it not rejected the offer.
Presently, Pakistan is heading towards a severe energy crisis in the coming months without the proper LNG supply required to generate electricity, fuel industries, and household consumption.
The ongoing Russia-Ukraine war, emergency gas purchases by European countries and the continuing disruption in the global energy supplies because of the last two COVID-19 pandemic years have increased LNG prices significantly, thus making it difficult for a financially doomed country like Pakistan to purchase gas cargoes at affordable rates.
In order to avoid power outages during the Eid-ul-Fitr holiday last month, the government paid nearly USD 100 million to procure a single LNG shipment from the 'spot' market--where commodities are purchased for immediate delivery as opposed to a long-term arrangement--a record for the nation.
Pakistan is perhaps the worst hit by the ongoing global LNG supply crunch.
Consequently, the Shehbaz Sharif-led government has limited options to address the issue, which include buying gas at a high rate or in the sports market; maximising electricity generation from other fuels or facing more load shedding in the coming months. Several cities in Pakistan, including Lahore and Karachi, are facing up to 10-18 hours of load shedding per day.
On June 5, Prime Minister Shehbaz Sharif tasked a committee comprising ministers for Energy, Petroleum, and Finance to provide an 'emergency plan' aimed at reduction in the electricity load shedding. Sharif also admitted that Pakistan did not have money to buy oil and gas.
The excruciatingly extended electricity outages have adversely affected local businesses and manufacturing units across Pakistan, further impacting the country's dwindling economy. All this is also threatening the stability of Pakistan's new political leadership, which is directly linked to the current economic instability in the country.
As an ominous sign of Pakistan's dwindling economy, local textile producers are expecting a USD 500 million cut in monthly exports from July, as energy shortages have reduced production capacity by 30 per cent.
Furthermore, in the face of rising energy prices, Pakistan is facing a 'balance of payment' crisis with forex reserves falling below USD 10 billion, enough for around 45 days of imports, as well as double-digit inflation, In order to address the issue, Pakistan's government is attempting to boost energy conservation, has cut working hours for public servants, and ordered shopping malls to factories to shut early in various cities including Karachi.
Moreover, coupled with rising coal and oil prices, these LNG rates have increased electricity fuel costs by more than 100 per cent in Pakistan, which is evident from the recent PKR 7.95 per unit "additional monthly adjustments" claimed by Water and Power Development Authority (Wapda) distribution companies and over PKR 11.38 per unit claimed by K-Electric Limited for the July month.
Besides recovering additional costs spent on importing petroleum products at higher prices, the government has substantially increased electricity rates and cut subsidies as a key condition to resume the International Monetary Fund's (IMF) USD 6 billion financial programmes for Pakistan.
For the moment, increased power rates are exacerbating economic woes for the common people and causing socio-political instability across the country. As an urgent measure to generate electricity, Pakistan may increasingly rely on coal-based power projects. According to some reports, the United States-based company M/s Spinnaker-Project 1, LLC has offered a minimum quantity of 0.5 million tons of coal to Pakistan per annum on 270 days revolving "credit facility" against Government of Pakistan (GOP) guarantees.
Since Pakistan cannot afford to purchase LNG cargoes at increased rates, it is looking for short-term measures like the coal import on credit to address the load shedding issue. But the truth is, the current energy crisis in Pakistan was a long time in the making.
Pakistan has been in the grip of power outages that have ranged between three and seven hours a day even before the Pakistan Democratic Movement (PDM) government came to power in April. Therefore, any hasty measure to resolve the LNG shortage crisis may not provide enough breathing space to Pakistanis, who are looking at severe power outages in the coming weeks. (ANI)