Pakistan’s persistent struggle to purchase liquefied natural gas (LNG) from the spot market took a disappointing turn as their latest attempt ended without any suppliers offering cargo, Bloomberg reported. The state-owned Pakistan LNG Ltd. received no responses to its tender seeking six LNG shipments for delivery between October and December. Traders with insider knowledge cited by Bloomberg disclosed this setback.
Why are Suppliers Wary?
The failure of the tender can be attributed to a combination of factors. Overseas banks have been hesitant to accept letters of credit from Pakistani counterparts, which has made suppliers wary of extending offers for LNG cargoes. This reluctance stems from concerns over the financial stability and credibility of Pakistani entities involved in the transactions.
The energy crisis in Pakistan is already a cause for concern, and the inability to secure LNG supplies will only exacerbate the situation. Frequent blackouts plague the country’s fragile power sector, and industries heavily reliant on consistent fuel supply will suffer further disruptions. Pakistan’s high dependence on imports to meet its energy needs has made it particularly vulnerable to external factors, such as the energy crisis triggered by Russia’s invasion of Ukraine last year.
Pakistan’s Gloomy Economic Outlook
This recent setback in LNG procurement amplifies the existing challenges faced by Pakistan. The nation is grappling with a weakening currency, political turmoil, and escalating sovereign default risk. The International Monetary Fund has criticized the government’s budget, deeming it insufficient to meet the goals outlined in the bailout program. The consequences of these issues extend beyond the energy sector, impacting the country’s overall economic stability and welfare.
The repercussions of the failed LNG tender will be felt across various sectors. Households already grappling with erratic power supply will experience intensified hardships due to prolonged blackouts. Furthermore, industries dependent on a stable fuel supply, such as manufacturing and agriculture, will encounter operational difficulties, hindering productivity and economic growth.
Pakistan now faces the daunting task of addressing the energy crisis and finding alternative solutions to fulfill its LNG requirements. It remains to be seen how the government will navigate this situation, considering the multifaceted challenges it currently faces.
With Inputs from Bloomberg)
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