Daily Times

Pakistan’s gas crisis continues to rage at full intensity-government officials have warned that there will be “no gas supply to household consumers for 16 hours,” marking the beginning of a very difficult winter. Natural gas has always been a scarce commodity in the country but this year, Pakistan finds itself dealing with the spillovers of Russia’s invasion of Ukraine, which has catalysed a global energy crisis. With no foreign exchange reserves to buy gas and a limited supply in the international energy market, the cash-strapped country is faced with an uncharacteristically severe shortage.

56 per cent of Pakistan’s refined petroleum is imported from the United Arab Emirates and the rest from Saudi Arabia. The global demand for energy products skyrocketed when Russia invaded Ukraine; prompting lucrative European markets to increase their imports from key suppliers like Saudi Arabia and Qatar who have raised their prices exponentially in view of this increased demand. Almost all gas cargoes are currently going to Europe, where buyers are more than willing to pay high prices to secure gas supplies amid a backdrop of worsening relations with Russia.

The energy deficit will likely persist all winter-the country’s failure to secure a long-term supply of LNG and invest in domestic gas production has come back to haunt it. The government claims that it plans to provide domestic consumers with more relief this winter compared to last year when the gas crisis was even worse and is currently looking to import alternative fuel sources such as liquefied petroleum gas (LPG). Over a decade ago, Pakistan forged long-term contracts with LNG suppliers in Italy and Qatar to protect itself from volatile prices but now these firms have found partners who are willing to pay much more. Pakistan is wary of importing gas from Iran or Russia over fears of international sanctions. In the meantime, gas trader Gunvor just informed the country that it will be unable to make a delivery scheduled for Jan.10, exerting further pressure on the crumbling economy to attract more bidders.

Pakistan’s gas shortage comes at a crucial juncture-the country is grappling with increasing inflation and a weakening currency, tax collection is half of what it should be, and power blackouts are still disrupting industrial operations, such as in the textile sector. An increase in demand for energy supplies is certain-it is imperative that Islamabad explore countries that can offer it a good deal and low costs, but also invest in its reservoirs to reduce its reliance on the outside world. *