Pakistan announces natural gas purchase agreement with various countries, including Russia

According to media reports, Pakistan is considering signing a liquefied natural gas purchase agreement with various countries, including Russia, as it seeks to secure supply and ease a crippling shortage. A statement released by the Ministry of Energy stated:

The government will go for the most favorable deal. Pakistan is mulling a government-to-government contract to import the power plant and industrial fuel, according to the statement.

Sources state that only a handful of countries are willing to sign new LNG contracts with Russia, as most importers shun Moscow due to President Vladimir Putin’s invasion of Ukraine. India and China are buying additional spot shipments of Russian gas, with some at a hefty discount to prevailing rates.

Asian and European liquefied natural gas spot prices are trading at a seasonal high as the war in Ukraine exacerbates an already tight market.

Pakistan’s Fuel Shortage

The move comes as Pakistan is grappling with blackouts due to a fuel shortage after several other long-term suppliers could not deliver shipments. The government resorted to purchasing LNG from the expensive spot market to keep the lights on, racking up debt that threatens to boost skyrocketing inflation further.

Pakistan has been hit especially hard by rising fuel costs. It has become a relatively developing nation that’s highly dependent on energy imports. Pakistan’s LNG import cost has increased 83% to $3.7 billion in the ten months ended April, according to government data.

New Govt Aims for Long-Term LNG Contract

Prime Minister Shehbaz Sharif aims to sign a new long-term LNG contract to help reduce fuel costs. Long-term deals are much cheaper than current spot rates and may provide some relief for the embattled government.

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