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Home Opinion & Editorial Editorial

Pricey LNG and shortages

Editorial by Editorial
September 7, 2021

Pakistan is expected to face massive a severe gas crisis in the coming months as the supply of the natural resource is slowly depleting. We are also relying increasingly on imported LNG being purchased at exorbitant rates and causing massive losses to the national exchequer.

Pakistan is set to import two cargoes for LNG for October at a price which is 65% more expensive than furnace oil. The average price of LNG was $20 per million BTU, the equivalent of oil being traded at $115 per barrel. Many Asian countries are purchasing at higher prices, making LNG unaffordable for many developing countries.

They are several reasons for the gas shortage. The demand for gas normally increases in winter and prices are high. This summer, the price of LNG has been high globally due to which Pakistan had to purchase on high rates. Many countries buy excess gas in summer and store it for winter to ensure supply and security but we have never planned ahead.

There is a high need for gas storage in Pakistan. We have adopted a Floating Storage and Regasification Unit (FSRU) model which can be termed as a ship for LNG transfer rather than land-based gas terminals. Although expensive and difficult, storage is vital for the operation of the gas market but unfortunately, we have not dedicated any resources in this regard.

Pakistan buys LNG to operate gas-fired powerhouses. We had switched after the first LNG terminal was built in 2015. However, things have changed and now LNG is being traded at even more rates than furnace oil. Industry experts suggest that due to rising prices in the Asian market, Pakistan should use furnace oil as much as possible to reduce the oil bill and inflation.

Pakistan made a record high import payment of $6.3bn in August. This widened the trade deficit to a record high at over $4bn and caused local currency, depreciating to 13-month low against US dollar. Despite the high rates of gas, many parts of the country including urban areas have to face chronic gas shortages. The authorities need to consider the long-term impacts of the gas crisis. It is imperative that resources are spent on gas storages to fulfill the demand.

Tags: CrisisGasLNGOilpakistan
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