Govt clueless about how to cope with LNG crisis: report

The coalition government led by Pakistan Muslim League Nawaz (PML-N) is clueless about how to deal with the LNG crisis while it is fair to assume that the situation in winter will get worse.

“Buy late in summers and early in winter”. This was the famous mantra pushed by some in the Pakistan media over the last few years. Do the pearls of wisdom still hold true? This summer the government bought 9 LNG cargos on spot at a loss of $500 million and now tendered for 10 to get zero. Shall our decision-makers try and buy early for winter now? Or have they forgotten, and if they have, would TV shows have an LNG 101 with them?

This is a reminder of how politicized and irrational our decision-making has been- especially when decisions are made for media narrative and political engineering, the results are usually suboptimal. For instance, tendering 10 LNG cargos and getting nothing but embarrassment. And that too before authorities go to an international LNG supplier to ask for additional LNG, an English daily Business Recorder reported based on its research.

Wasn’t there a need to check where the market was, before going to the tender? If the authorities refused to entertain a single cargo at $39 a few days ago, how will the country accept alternate bids when the LNG market had gone up by an additional 10%? What was the thinking behind this decision?

Energy crisis: Pakistan’s LNG request received not a single offer: report

As pointed out earlier, whilst there is no exact science for predicting the market, there is a level of competence required to control things that are in the government’s hands. Some homework is required to develop strategies to govern. It is high time to look back and learn from some of the earlier mistakes and more importantly to sit down and develop rational strategies for the future.

Let’s start from the history- Pakistan has 8 Long term LNG cargos; there have been many months where Pakistan has survived with this level of LNG supply. So why is the situation a lot worse than it was a year ago? Is it due to a new driver on the steering wheel or its incompetence, or is it due to an increase in theft?

Someone needs to look at this more rationally and the most important element is UFG (unaccounted for gas). There are rumours afloat about how UFG has increased significantly over the last few weeks. Then there is CNG available at some stations when there was a clear embargo.

Second looking at the future, without claiming to know it all, it is fair to assume that the situation in winter will get worse. There are reasons to believe so. Europe’s Nordstream 1 is on maintenance, which means European efforts of building storage for winter is getting a major hit. Europe, Japan, China, and Korea are all going to fight it out for winter gas because, in winter, there are no substitutes for gas for space heating. It would be fair to assume that the only one who sees this play out will be Putin- no one else knows how gas will behave other than Putin.

The question is what that means for Pakistan. One, gas availability will be a challenge. Second, imported gas will potentially be unaffordable. Then there will be issues of current account deficit due to higher LNG imports. And how the export sector will be facilitated and at what costs?

Pakistanis to face worst loadshedding as govt fails at LNG agreement

Gas will have to be rationed. Storage will have to be managed meticulously – the existing line pack in Pakistan & LNG terminal will have to space our gas a lot more than the 5 days it can currently afford.

Sadly,a mere look at the paper produced by the ministry of Planning implies that the ministry is clueless about how they will manage these issues. And they are being supported by the state minister for energy who is spending more time criticizing the PTI government rather than trying to find solutions for the future. It seems the government is heading to a gunfight with a butter knife.

Pakistan’s LNG request

Pakistan’s energy crisis looks set to drag on for months after another failed attempt by the nation to import LNG cargoes as the country did not receive a single in a $1 billion purchase tender, reported Bloomberg.

In an unusual development, state-owned Pakistan LNG didn’t receive a single offer in a $1 billion liquefied natural gas purchase tender, according to traders with knowledge of the matter. That illustrates both the extent of the global fuel shortage, and also the reluctance of suppliers to sell to a country in the depths of an economic crisis.

Pakistanis to suffer menace of loadshedding by December this year

It’s the fourth time in roughly a month that Pakistan — which is already suffering frequent blackouts — has failed to complete an LNG purchase tender. The relatively poor country is reliant on energy imports, meaning it’s been hit especially hard by soaring prices. Inflation has topped 20%, and the government is negotiating with the International Monetary Fund on a financial rescue package.

Already elevated Asian gas prices started rising further over the last few weeks on increasing supply disruptions from Russia to the US. Global LNG flows are being redirected to energy-starved Europe, where utilities are willing to pay more than emerging markets. Thailand and India have also been curbing purchases due to the high prices, but they’re not in as perilous a situation as Pakistan.

The world’s fifth-most populous country was looking to buy 10 LNG cargoes from the spot market for delivery from July to September via the tender that closed on Thursday. Pakistan bought almost half of its LNG on the spot market last year, with the rest coming under long-term deals, according to data compiled by BloombergNEF.