Another energy crisis looming Pakistan is never away from a crisis and it looks like it has become an essential part of life in the country. The crises encountered by the country are myriad in nature and run through the entire gamut of existence. Despite the perpetuity of the deep problems hardly any effort is detected to have taken place aimed at advance planning to prevent such frequent crises. Most painful are cries related to energy as Pakistan is heavily dependent upon imported fuels that are not only expensive but also remain in the grip of price and supply fluctuations. Only a well-designed strategy to avoid such issues could be the only solution but sadly Pakistani planners lack such vision and capacity to avoid them resultantly Pakistan pays heavy price for this negligence and inefficiency.
The problem this time round is simply many-pronged as Pakistan is badly cash-strapped and there is intense competition in the energy market globally. Consequently it has become extremely difficult for the country to procure LNG at an affordable rate when little is available in an international market that has been sorely affected by the political fallout of the Russia-Ukraine war. It is quite evident that the global LNG shortages have sent the fuel’s price spiraling to record highs and it was reported that Pakistani authorities dealing with gas were left with no option but to buy the most expensive lot in response to a tender it floated for four cargoes of liquefied natural gas (LNG) for July shipments. Keeping in view the prevailing situation the authorities dealing with gas conceded that Pakistan could not simply compete with the buying power of European countries who were also potential customers for the same reserves that Pakistan desperately needed.
It is now reported that Pakistan’s failure to find a bidder for LNG slots had forced authorities to shift to alternative sour¬ces of energy for power generation which would take a month or so to yield results. Since supply from Russia is suspended due to the war with Ukraine, European countries are also buying gas from everywhere it is available with the result that LNG, which was priced at $4 two-and-a-half years ago, is no longer available for even $40. The consequence of this situation was that Pakistan failed to find a bidder for three LNG slots and received the highest-ever rate for another slot as European customers lapped up spot market quantities to compensate for the Russian supply disruption amid widespread electricity shortages.
In this context it was reported that Pakistan floated a tender on 16 June for four cargoes — one each in the first and second weeks, and two in the last week, of July. However, no bidders came forward for the 2-3, 8-9, and 25-26 July delivery windows. It is also mentioned in this connection that this was the third futile attempt to procure LNG cargo in the first week of July as the earlier two tenders, issued on 31 May and 7 June, attracted only two and one bidder, respectively, but none was technically responsive resultantly the bids were returned unopened. The authorities now point out that they are looking into other sources of energy such as importing coal and furnace oil as gas is not only more expensive but there is also a paucity in its availability.
It may be taken note of the fact that Qatar had offered LNG shipment at just below $40/mmBtu, which would have been the priciest for Pakistan if it had not rejected it. The most expensive cargo that Pakistan has ever purchased was at $30.65/mmBtu in November 2021 and the Qatari price was way above it. Though the authorities maintain that they are in touch with many gas exporters but they have so far not been able to lock any new deal to ease power outages amid surging electricity prices. The issue has exorbitantly increased the fuel cost by more than a whopping 100 per cent.
The hapless Pakistani customers are forced to pay higher prices as the government plans to raise the power tariffs by 47 per cent to recoup some of the losses being incurred on account of expensive fuel imports. It is accordingly reported that LNG prices in Pakistan have already gone up by 40 per cent in recent months, despite most cargoes coming from cheaper long-term contracts with Qatar owing to expensive spot purchases by the present government in April to meet the power demand. It is predicted that Russia will not ease its grip on energy resource till it achieves its strategic designs in Ukraine and the obvious casualty of such a policy would be gas shortages and higher prices. The current supply gaps have already forced rich countries such as Germany to initiate gas rationing and consider retracting on their commitment to halt financing for overseas fossil fuel projects in a reversal of their plan to tackle global warming. In these circumstances it will be next to impossible for a cash-strapped Pakistan to procure LNG and many experts are advising to cut gas wastage and devise plans to begin rationing. TW
Another energy crisis looming
ByMalik Nasir Mahmood Aslam
Seasoned social activist
Dated
July 8, 2022
Another energy crisis looming Pakistan is never away from a crisis and it looks like it has become an essential part of life in the country. The crises encountered by the country are myriad in nature and run through the entire gamut of existence. Despite the perpetuity of the deep problems hardly any effort is detected to have taken place aimed at advance planning to prevent such frequent crises. Most painful are cries related to energy as Pakistan is heavily dependent upon imported fuels that are not only expensive but also remain in the grip of price and supply fluctuations. Only a well-designed strategy to avoid such issues could be the only solution but sadly Pakistani planners lack such vision and capacity to avoid them resultantly Pakistan pays heavy price for this negligence and inefficiency.
The problem this time round is simply many-pronged as Pakistan is badly cash-strapped and there is intense competition in the energy market globally. Consequently it has become extremely difficult for the country to procure LNG at an affordable rate when little is available in an international market that has been sorely affected by the political fallout of the Russia-Ukraine war. It is quite evident that the global LNG shortages have sent the fuel’s price spiraling to record highs and it was reported that Pakistani authorities dealing with gas were left with no option but to buy the most expensive lot in response to a tender it floated for four cargoes of liquefied natural gas (LNG) for July shipments. Keeping in view the prevailing situation the authorities dealing with gas conceded that Pakistan could not simply compete with the buying power of European countries who were also potential customers for the same reserves that Pakistan desperately needed.
It is now reported that Pakistan’s failure to find a bidder for LNG slots had forced authorities to shift to alternative sour¬ces of energy for power generation which would take a month or so to yield results. Since supply from Russia is suspended due to the war with Ukraine, European countries are also buying gas from everywhere it is available with the result that LNG, which was priced at $4 two-and-a-half years ago, is no longer available for even $40. The consequence of this situation was that Pakistan failed to find a bidder for three LNG slots and received the highest-ever rate for another slot as European customers lapped up spot market quantities to compensate for the Russian supply disruption amid widespread electricity shortages.
In this context it was reported that Pakistan floated a tender on 16 June for four cargoes — one each in the first and second weeks, and two in the last week, of July. However, no bidders came forward for the 2-3, 8-9, and 25-26 July delivery windows. It is also mentioned in this connection that this was the third futile attempt to procure LNG cargo in the first week of July as the earlier two tenders, issued on 31 May and 7 June, attracted only two and one bidder, respectively, but none was technically responsive resultantly the bids were returned unopened. The authorities now point out that they are looking into other sources of energy such as importing coal and furnace oil as gas is not only more expensive but there is also a paucity in its availability.
It may be taken note of the fact that Qatar had offered LNG shipment at just below $40/mmBtu, which would have been the priciest for Pakistan if it had not rejected it. The most expensive cargo that Pakistan has ever purchased was at $30.65/mmBtu in November 2021 and the Qatari price was way above it. Though the authorities maintain that they are in touch with many gas exporters but they have so far not been able to lock any new deal to ease power outages amid surging electricity prices. The issue has exorbitantly increased the fuel cost by more than a whopping 100 per cent.
The hapless Pakistani customers are forced to pay higher prices as the government plans to raise the power tariffs by 47 per cent to recoup some of the losses being incurred on account of expensive fuel imports. It is accordingly reported that LNG prices in Pakistan have already gone up by 40 per cent in recent months, despite most cargoes coming from cheaper long-term contracts with Qatar owing to expensive spot purchases by the present government in April to meet the power demand. It is predicted that Russia will not ease its grip on energy resource till it achieves its strategic designs in Ukraine and the obvious casualty of such a policy would be gas shortages and higher prices. The current supply gaps have already forced rich countries such as Germany to initiate gas rationing and consider retracting on their commitment to halt financing for overseas fossil fuel projects in a reversal of their plan to tackle global warming. In these circumstances it will be next to impossible for a cash-strapped Pakistan to procure LNG and many experts are advising to cut gas wastage and devise plans to begin rationing. TW
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