Pakistan is facing a severe energy shortage and is urgently seeking liquefied natural gas (LNG) from the spot market. State-owned Pakistan LNG Ltd. recently purchased its most expensive LNG shipment in approximately four years from BP Plc for June 6-7 delivery. This particular purchase was necessitated by the cancellation of a planned shipment from Qatar, an event linked to intensified tensions and the effective closure of the Strait of Hormuz.
The country's reliance on LNG for power generation, especially during peak summer demand, has forced it to procure expensive spot cargoes. The Strait of Hormuz, a critical chokepoint for global energy supplies, has seen disruptions due to recent conflicts, leading to elevated spot LNG prices and a costly bind for Pakistan. While a tentative agreement to ease hostilities in Iran and reopen the strait has been made, analysts caution that a return to normal supply flows will be gradual, not immediate.
Pakistan LNG Ltd. issued another tender for an emergency spot purchase of 140,000 cubic meters of LNG for delivery between June 21 and 22 a week ago. This is part of a series of accelerated short-term procurements. The company has been navigating high war-risk insurance premiums, legal uncertainties, and physical congestion that continue to hinder the swift movement of vessels through the strait. Many shipping companies are hesitant to resume normal operations due to lingering security concerns, potential for renewed hostilities, and the slow process of clearing the backlog of commercial vessels in the Persian Gulf.
Earlier attempts to secure LNG supply faced challenges as well. In May, Pakistan failed to award an emergency tender for two shipments, betting on an easing of hostilities in the Strait of Hormuz and the arrival of cheaper supplies from Qatar. However, the current situation indicates those expectations were not fully met, pushing Pakistan back into the expensive spot market for urgent supplies. The country, which imports nearly all its oil through the Strait of Hormuz, remains highly vulnerable to supply shocks despite efforts to diversify its energy mix.
