The country is currently facing one of its worst economic crisis which has led to a severe fuel and energy shortage in the country. Pakistan’s desperate attempts to secure gas supplies are bearing no fruit as the fourth tender for gas purchase expired without any deal in about a month.
Last week the government of Pakistan floated a tender inviting bids from international suppliers for 10 gas cargoes over the period July-September. However, the tender failed to receive even a single response.
💰 Pakistan LNG's tender to buy 10 cargoes for delivery between July and September didn't receive any offers
⚡ That's set to exacerbate blackouts across Pakistan
🇪🇺 Global LNG flows are being redirected to Europe, where utilities are willing to pay more than emerging markets pic.twitter.com/KYSUW2YK7x— Stephen Stapczynski (@SStapczynski) July 7, 2022
The utter failure of the latest tender points to the worsening global fuel crisis. Similarly, the worsening economy of Pakistan is also a reason that it didn’t receive any response to its tender. International gas suppliers are lacking confidence in the country as the government has yet not reached a final agreement with IMF for the financial lifeline.
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Since the long-term contracts with Qatar for gas supply are not fulfilling the gas-needs of Pakistan, hence Pakistan is relying on the spot market to bridge the gap. According to BloombergNEF, Pakistan purchased almost half of its LNG on the spot market last year.
Pakistan had procured two LNG cargoes in May at the rate of $29.6700/mmbtu and $24.1500/mmbtu. However, due to rising global demands, and particularly the rising demand in Europe where consumers are willing to pay higher prices for utilities, LNG prices have skyrocketed. The only offer that Pakistan had received in response to a tender last month was for $39.80/mmbtu, however, the offer was scrapped as it was unaffordable for the cash-strapped country.
Pakistan’s power production heavily relies on LNG as LNG-based power plants contribute a major share in the country’s total power output. Due to the looming economic crisis in the country and the disruption in the global supply chain of LNG, Pakistan has been unable to secure much-needed gas supplies.
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The inability of Pakistan to procure LNG will result in a worsening of the energy crisis in the country. The energy crisis in the country has manifested as prolonged load-shedding across the country. If the immediate gas supply is not secured, the situation will only worsen.