After failing to reach an agreement on a deal for the delivery of natural gas next month, Pakistan is again facing an intensification of its power crisis. Since the country is already taking steps to address severe blackouts, the July tenders were canceled due to their high cost and poor participation.
According to traders with the knowledge of the situation, the state-owned Pakistan LNG Ltd. canceled a purchase tender for liquefied natural gas shipments in July after receiving an offer that would have been the most expensive shipment ever sent to the country.
Musadik Malik, the state minister for petroleum, has issued warnings about power outages in July and a gas shortage in the upcoming winters.
This is the third time this month that Pakistan has failed to complete an LNG tender for July, and the country’s inability to purchase fuel threatens to exacerbate electricity shortages just as hotter weather boosts air conditioning and power demand.
In response to inquiries over the LNG tenders, Zakaria Ali Shah, a spokesman for Pakistan’s energy ministry, stated, “We’re taking a different strategy.” He claimed that there is currently no fuel scarcity in Pakistan. In times of disaster, the country might redirect resources to high-priority industries like power generators.
In an effort to promote energy saving, the Pakistani government has reduced the hours of work for public employees and ordered companies and retail centers in a number of cities, including Karachi, to close early. On Thursday, Shehbaz Sharif, the prime minister, promised to take more action to put an end to blackouts.
Prices for LNG have increased as Europe increases its imports of the ultra-cold fuel amid growing worries that Russia would reduce pipeline gas supplies. Further tightening has been brought on by an issue at a crucial US export facility.
According to statistics gathered by BloombergNEF, Pakistan purchased over half of its LNG on the spot market last year, with the remaining portion coming from long-term agreements.
The tender, which concluded on Thursday, only received one offer for one of the four cargoes sought. The price was approximately $40 per million British thermal units or around four times what Pakistan paid in the previous year. The expensive offer was rejected by Pakistan.
As Pakistan continues to raise domestic prices to comply with a vital need to win a crucial bailout from the International Monetary Fund, expensive fuel imports are beginning to affect consumers. To get through the economic crisis in the coming 12 months, the government will need at least $41 billion. Thailand recently reduced purchases due to high pricing, making Pakistan not the only cash-strapped developing country trying to get LNG in a competitive global market.