Pakistan and Bangladesh have incurred substantial additional costs for liquefied natural gas (LNG) imports, estimated at over $1 billion combined, since March. This surge in expenditure is a direct consequence of ongoing disruptions in the Strait of Hormuz, a critical shipping lane. The situation has forced both nations to increasingly rely on the volatile spot market for their LNG needs, where prices have been significantly higher than their long-term contract rates.
For Pakistan, the repeated disruptions have led to several urgent LNG purchases. For instance, in late June, state-owned Pakistan LNG Ltd. acquired a cargo from BP Plc for June 30-July 4 delivery at $16.74 per million British thermal units. This was notably higher than the $15 per million Btu spot price in Asia at the time. Further, in early July, Pakistan LNG Ltd. bought another shipment from TotalEnergies SE for July 10-11 delivery at $17.37 per million British thermal units. These are in addition to a tender issued in mid-July for a July 15-16 delivery cargo after a scheduled Qatari shipment was canceled.
These emergency purchases stand in contrast to early May, when Pakistan opted against spot LNG purchases, anticipating an easing of tensions in the Strait of Hormuz and the arrival of cheaper contractual supplies from Qatar. However, the anticipated recovery of flows through Hormuz has not materialized, compelling Pakistan to continue seeking urgent shipments. The broader impact of the Strait of Hormuz disruptions has been profound, with Pakistan facing blackouts and its largest gas distributor cutting supplies to industrial customers as early as March, indicating a severe strain on its energy supply due to the Middle East conflict.
While the article focuses primarily on Pakistan's purchases, it also notes Bangladesh's similar plight, contributing to the total $1 billion in extra spending. The persistent nature of the supply chain issues through the Strait of Hormuz, which remain constrained since a widening conflict in the Middle East caused the most extensive disruption to global energy trade since Russia's invasion of Ukraine in 2022, means both countries are likely to continue facing elevated energy costs and potential supply shortfalls, impacting their economies and industries.
