Pakistan in Discussion with Qatar for Supply of LNG Cargoes Amid Electricity Shortfall

• Pakistan and Qatar are in advanced talks for at least four LNG cargoes.
• Disruptions to LNG imports follow geopolitical events in the Middle East.
• The Power Division has ordered approximately 400 million cubic feet per day (mmcfd) of LNG to combat load shedding.
• Qatari LNG previously returned from the Strait of Hormuz due to security concerns.
• Prime Minister Shehbaz Sharif recently concluded a tri-nation tour, including a visit to Qatar, aimed at diplomatic de-escalation.

Geopolitical Volatility Threatens Energy Security

ISLAMABAD – Pakistan is engaged in high-level discussions with Qatar for the urgent supply of at least four Liquefied Natural Gas (LNG) cargoes, a move necessitated by a burgeoning electricity shortfall and the continued disruption of energy imports through the strategically vital Strait of Hormuz. Sources close to the matter revealed to The Peking Brief that the ongoing geopolitical turbulence in the Middle East has significantly impacted Pakistan’s energy security, prompting an urgent appeal to its energy partners.

The Power Division has formally requested the Petroleum Division to secure approximately 400 million cubic feet per day (mmcfd) of LNG. This critical order is intended to mitigate widespread load shedding, which has become a stark reality even before the commencement of the summer season, typically a period of heightened electricity demand.

Disruptions and Diplomatic Undertakings

The flow of LNG to Pakistan encountered significant hurdles early last month following the closure of the Strait of Hormuz, a pivotal chokepoint for global energy transit, amid escalating tensions stemming from US-Israel actions against Iran. In a retaliatory posture, Iran targeted fuel installations in several Gulf nations hosting US assets and bases. This volatile environment led Qatar, a major global LNG supplier, to declare force majeure on its international contracts, including those with Pakistan, further exacerbating the nation’s energy deficit.

Sources indicate that Qatari LNG cargoes had previously been compelled to turn back from the Strait of Hormuz, underscoring the gravity of the situation. It is believed that a substantial number of loaded Qatari petroleum cargoes – estimated between 25 to 30 – are currently held up between processing stations and the Strait. Pakistan has made a high-level request to Qatar for the diversion of at least four of these stranded cargoes, leveraging its diplomatic influence to secure this crucial energy lifeline.

This diplomatic push aligns with Prime Minister Shehbaz Sharif’s recent conclusion of a tri-nation tour, which included a visit to Qatar. The tour was part of broader diplomatic efforts aimed at de-escalating tensions between the United States and Iran. The presence of Pakistani-flagged vessels navigating the Strait of Hormuz is reportedly being considered as a potential conduit for these much-needed LNG supplies.

Economic Ramifications and Grid Stability

The Power Division’s directive highlights the precarious state of the national grid. Without a stable supply of regasified LNG (RLNG), Pakistan faces the imminent prospect of increased reliance on more expensive alternative fuels such as High-Speed Diesel (HSD). The financial implications of this shift are substantial, threatening to drive up generation costs and consequently burdening end consumers with higher fuel cost adjustments. Large-scale LNG-powered plants, particularly in Punjab, which contribute significantly to the national grid’s capacity, are indispensable for maintaining stability, especially as temperatures rise.

The alternative of utilizing HSD or furnace oil presents an economically unviable proposition at current market prices. Officials estimate that the cost per unit of HSD-based generation, which stood above Rs45 prior to the recent Middle East strikes, may now exceed Rs80. Furthermore, HSD is critically needed for the transport and agricultural sectors, particularly during the ongoing crop harvest season, making its diversion for power generation highly impractical.

The Power Division has provided the Petroleum Division with a detailed weekly forecast of RLNG requirements for both the National Grid Company (NGC) and K-Electric systems, emphasizing the need for meticulous allocation of Qatar-contracted RLNG cargoes to ensure uninterrupted and cost-effective power generation during the anticipated summer peak demand, which can exceed 28,000 MW.