Pakistan ventured into liquefied natural gas (LNG) imports just six years ago, but its increasing reliance on this super-chilled fuel has turned into a formidable challenge. Soaring global gas prices, exacerbated by shortages in Europe, have propelled Asian LNG prices to unprecedented levels for this time of the year. Consequently, Pakistan is now compelled to pay record prices for spot shipments to supplement its supply under long-term contracts or, in some cases, forego them altogether.
The escalating shortfall is anticipated to lead to power outages during the winter, warned Iqbal Z. Ahmed, Chairman of Pakistan GasPort, which operates one of the country’s import terminals. He emphasized that the impact will extend beyond domestic electricity supply, affecting exports, industry, and overall morale. The severity of the energy crisis is expected to reverberate across emerging markets, already grappling with the financial strain of elevated fuel prices. Economies that cannot afford these soaring costs may face disruptions as winter intensifies, driving up heating demand and spot prices.
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In the past decade, emerging nations like Pakistan developed LNG import strategies based on the assumption that the fuel would remain abundant and affordable. However, this outlook shifted dramatically this year as Asian LNG rates surged. While Pakistan secures over half of its LNG through long-term contracts, offering some protection against spot market volatility, it still requires spot shipments during winter. The affordability of these spot LNG purchases remains uncertain, leading to political controversy and calls for an inquiry into state-owned importer transactions.
Despite assurances of increased supply from Qatar under long-term deals, the financial strain may prompt the Pakistani government to encourage consumers to switch to electricity where feasible. This strategy aims to preserve gas for industrial and heating needs. Additionally, the escalating costs pose a threat to the nation’s transition to gas as a cleaner-burning transport fuel.