Islamabad December 15 2022: Asian markets have been more adversely affected by the disruption in LNG market due to Russia Ukraine War, reported by IGU.
Both Pakistan and Bangladesh have had to scrap LNG tenders this year, receiving unaffordable offers, or none at all. Thailand has also found itself priced out of the spot LNG market. Pakistan and Bangladesh are dependent on LNG to address domestic gas deficits, leaving them with little choice but to fall back on higher fuel oil and coal imports, as well as facing power shortages. Both have suffered extensive rolling blackouts as a result of an inability to source spot LNG volumes.
The war in Ukraine has upended global energy flows, with European countries turning to the LNG market as they scramble to reduce their dependence on Russian gas imports. And European buyers are in a stronger position to pay higher spot prices, creating difficulties for Pakistan
The war in Ukraine has upended global energy flows, with European countries turning to the LNG market as they scramble to reduce their dependence on Russian gas imports. And European buyers are in a stronger position to pay higher spot prices, creating difficulties for Pakistan.
Indeed, Pakistan has repeatedly struggled to complete LNG tenders recently, having previously bought around half of its LNG on the spot market last year. It had been one of the fastest-growing LNG markets over the past few years, according to Munton. But in June, a third LNG tender for July was scrapped without any volumes procured amid reports that the only offer would have been the most expensive cargo ever delivered to the country.
In October, a tender for longer-term supply of LNG over a period of 4-6 years also failed, having reportedly not attracted any sellers.
The situation is further complicated by some hesitancy among sellers to supply LNG to Pakistan out of concern that the country may not be able to make payments in the future.
“Sellers are hesitant to sell to Pakistan,” a Wood Mackenzie senior research analyst, Raghav Mathur, tells GVG. “In the current LNG market situation where sellers can be choosy and picky, even the smallest changes in terms and conditions can complicate matters. Hence, a deferred payment option will only reduce Pakistan’s chances of procuring LNG,” he says.
Pakistan has an existing long-term supply agreement in place with Qatar that it is increasingly reliant on in the face of its ongoing struggle to procure new volumes. There is no immediate prospect of an improvement.
“Pakistan will have challenges for procurement of gas,” Mathur says. “It seems difficult that they will be able to procure LNG through long-term contracts,” he continued. “If the spot prices do come down for certain timeframes next year, then they will have to compete against other buyers who are better equipped to price that LNG away from them. However, what they can do is, maybe leverage their existing relationship with Qatar under their existing long-term contracts and maybe seek extra volume for a short duration of time next year.”
Related Posts
