LNG is No Longer a Key Energy Source for Pakistan, Says Minister
(Bloomberg) --
Liquefied natural gas is no longer playing a key role in meeting Pakistan’s energy needs, according to its petroleum minister, a stark shift for the South Asian nation once seen as a fast-growing buyer.
LNG shipments to Pakistan peaked in 2021 and have slumped since Russia’s invasion of Ukraine led to a price surge. Deliveries are down 5% so far this year, according to ship-tracking data, and are poised to keep falling as Pakistan makes requests to suppliers to reduce contracted deliveries.
“This is not a temporary blip,” Ali Pervaiz Malik said in an interview in Islamabad. “We have to readjust our strategy.”
Pakistan a decade ago planned a massive expansion of LNG imports to replace dwindling local production. That strategy was upended over the last few years — a surge in prices made the fuel uncompetitive. Meanwhile, power demand dropped since the government was forced to increase rates to secure loans from the International Monetary Fund, a move aimed at reducing utility debt.
While there are new power projects in the pipeline, the minister said he doesn’t see any space for LNG, as shipments remain too expensive.
Pakistan is still straddled with long-term LNG purchase agreements. Malik recently met with counterparts in Qatar, the largest LNG supplier to Pakistan. Pakistan had planned to ask Qatar to delay delivery of LNG supply over the next five years, Bloomberg reported.
Malik said he will recommend to the government to remain within Qatar’s contract, or agree to a mutually acceptable arrangement with the supplier. He didn’t elaborate on what that meant.
Pakistan’s other supplier, Eni SpA, has a more flexible contract, which allows the country to sell its excess supply into the spot market, with profits being shared between the two parties, he said.
Pakistan will incentivize local gas exploration to help reduce costs for power producers and cut back debt, said Malik. “We are hopeful whatever uptake is there in gas demand, we will be able to more than compensate for the decline in LNG through local supplies,” he added.
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