PAKISTAN’S cash-strapped government has been forced to buy the priciest LNG shipment from a Qatari trader for delivery later this month to avoid blackouts. Pakistan must pay a huge amount for its energy needs following default by two suppliers on their long-term commitments to supply one LNG cargo each per month at the fixed rate of 11.95pc and 11.63pc of Brent with the spot market now exceeding 35pc of Brent. The Qatari firm will supply the cargo at a price of more than $30.5mmbtu, which will bridge the anticipated gas supply gap during the last week of this month. The offer for another cargo for delivery in the third week was, however, rejected since the government doesn’t see any serious gaps at that point. The energy minister told a TV channel that the country had now secured a total of 10 cargos, including seven from Qatar under a long-term and far cheaper deal made by the previous government in 2015 for the ongoing month. The state-owned PSO is also procuring additional furnace oil supplies to make up for gas shortages during the peak winter months.
The government has been caught in a difficult situation ever since world gas prices began soaring on supply disruption and increased demand. In recent months, it cancelled a few bids for spot LNG in anticipation of the easing of prices and later paid more for its wrong market readings. It may have to pay even more for cargos it intends to purchase for delivery in the next three months as the country faces an expected supply shortfall of about 385mmcfd in December, 240mmcfd in January and 275mmcfd in February owing to non-availability of LNG cargos amid a historically high international market. No matter what the opposition has to say, the government can’t be faulted for procuring expensive gas given market conditions worldwide. It will be a major achievement if the government is able to purchase cargos for the remaining winter months even at the present price.
That said, it must be pointed out that expensive energy will add further to the burden on inflation-stricken power consumers and unleash a new round of price hikes in the coming month. That would be even tougher for the government to defend and it will find itself facing strong demands for relief in energy prices. Would it be able to help the people? Price comparisons with other countries will not work.
