|Given the shortages being faced currently, and in light of upcoming surge in demand for electricity during winter season, Pakistan is in the market for LNG at a time when prices are on the up. The tender awarded to Pakistan LNG Limited (PLL) for the month of May is quite costly for the country mainly owing to supply-chain disruptions in the international market on the back of Russia-Ukraine war. It is important to remember that these cargoes are being sought on an urgent basis after earlier committed cargoes were cancelled, and the former government’s mismanagement of LNG procurement also further exacerbated the situation.|
Pakistan has already been experiencing power shortages in recent weeks with power shortages ranging between 3-7 hours per day. The PTI government was hesitant to order spot LNG tenders while long-term suppliers defaulted during the previous winter amid a volatile international market. Given these circumstances, we don’t really have a lot of options and will have to absorb this higher cost considering our immediate requirements.
The authorities have been struggling to arrange furnace oil to make up for the LNG gap. However, in the process the additional monthly fuel cost adjustments had more than doubled over the reference prices, resulting in up to Rs6 per unit of additional electricity costs in the recent months. In light of the prevailing situation, perhaps shifting away from oil towards LNG is the most feasible option in the medium term.
These LNG bids will help reduce the ongoing gas shortage and allow CNG stations to operate after long closures. It has to be said that this is a bold and difficult step the new government has had to take to address our power supply needs. In the long term however, we must look to transition towards more renewable forms of energy, such as wind, solar, and hydel, especially considering how LNG supplies are also vulnerable to global developments and other external factors. This crisis provides us with an opportunity to restructure and adopt more sustainable solutions for the future.