Pakistan GasPort Chairman Iqbal Z. Ahmed on Friday warned that if LNG deliveries do not resume soon, the country’s floating LNG storage units will run out of gas by the end of this week.
The ongoing Iran war, and Tehran’s closure of the vital Strait of Hormuz shipping lane, has disrupted fuel supplies globally. QatarEnergy, which supplies a bulk of Pakistan’s LNG, declared force majeure last week, halting natural gas production on contracts with buyers are strikes targeted its LNG facilities.
Speaking with CNBC, Mr. Ahmed said the PGPC FSRU is currently operating at 100MMCFD instead of its capacity of 600, warning that it will run out of supplies in the “next seven days or so” even with the curtailed operations. The second terminal, he said, was also operating at a lower capacity, and was on track to run out of gas in 7-8 days.
The PGPC chairman explained that spot cargos remained expensive though they had recently dropped to around $22/MMBTU. Nevertheless, he said, Pakistan may soon have no other option but to try and buy from spot markets, warning this would affect the entire supply chain and pricing, triggering inflation. He noted that after Qatar’s declaration of force majeure, Pakistan LNG Limited had also served a force majeure notice to PGPC.
Mr. Ahmed advised the Government of Pakistan to seek an exemption from the U.S. for buying Russian LNG, noting Washington had already allowed India to buy crude oil from Russia. He said Russia had been trying to enter the Pakistan market, but was hampered by sanctions, emphasizing that seeking a waiver for sanctions as a temporary measure could benefit the country. “That is perhaps the only option that is currently available,” he added.
During the discussion, the PGPC chairman said he disagreed with Pakistan’s decision to renegotiate its LNG contract with Qatar, noting it was a “very good deal.” In this scenario, he said, Islamabad need to pursue long-term objectives rather than focusing on a short-term, month-to-month, day-to-day approach. “We need to think through a strategy of streamlining LNG supplies on a long-term basis,” he said.
Mr. Ahmed emphasized that the LNG supply chain was completely disrupted after the Iran war. The situation, he warned, was also discouraging future investment, especially in PGPC’s plans to secure a second terminal that would provide LNG directly to consumers, as already happening in China and South Korea. “Pakistan has the need,” he said. “We believe that things will stabilize and Pakistan is a very good market to invest in on a long-term basis,” he added.
The PGPC chairman urged the government to allow both companies operating LNG terminals in Pakistan to import in the private sector and sell to the private sector without involving government guarantees through spot market. “I think private sector can do a better job in price negotiation rather than the government,” he said, adding the government could also counter inflationary pressures by waiving certain charges currently imposed on the import of LNG and LPG.
“Import should be encouraged because there’s a huge difference between local production and demand,” he said, adding there was an additional 40% imposed through local expenses, which could be brought down to 10-15%. Unfortunately, he said, the government had not sought any discussions with stakeholders on policy.