Pakistan Buys Most Expensive LNG for Up to 4 Years Due to Hormuz Crisis
State-owned Pakistan LNG Corporation has bought the most expensive batch of liquefied natural gas (LNG) in four years on the spot market, as the recent escalation of the Hormuz crisis cut off supplies from its contracted supplier, Qatar.
Pakistan's state LNG importer has purchased a cargo for delivery early next week through a tender that closed on Wednesday. The purchase price for the cargo is about $20.70 per million British thermal units (MMBtu), traders with knowledge of the deal told Bloomberg on Thursday.
Record Purchase Price
The purchase price is the highest Pakistan has paid for a shipment of LNG since 2022, when spot prices in Asia soared to a record high after Russia invaded Ukraine and cut pipeline gas supplies from Russia to Europe.
| Compare Pakistan's LNG prices over time | |
|---|---|
| Time | Price (USD/MMBtu) |
| Present | 20.70 |
| 2022 (peak) | Over 40 |
| Before the crisis | Under 15 |
Pakistan's LNG Supply Situation
Pakistan was forced to return to the spot LNG market several times this year, after the Iran war and the closure of the Strait of Hormuz triggered a new global competition for LNG supplies in the absence of flows from Qatar.
Historically, Pakistan received almost all of its LNG from Qatar under long-term agreements at fixed prices. However, the South Asian country has had problems buying since the Iran war began and traffic across the Strait of Hormuz has stalled.
| How to buy LNG from Pakistan | ||
|---|---|---|
| Form | Proportion | Characteristic |
| Long-term contract (Term) | Previously ~100% | From Qatar, fixed price |
| Spot | Current increase | Price fluctuations, diverse sources |
Impact of the Hormuz Crisis
Currently, Pakistan is on track to buy the most LNG cargoes on the delivery market in just one month since the Iran war began, as renewed escalation in the Strait of Hormuz once again disrupted contracted supplies from Qatar.
Earlier this week, Pakistan LNG issued its second bid for spot supplies in just the past two weeks, as fresh hostilities over the past few days once again disrupted shipments from Qatar, with no LNG tankers observed to have left the Strait of Hormuz for several days.
The Future of Purchasing Pakistani LNG
This emergency LNG tender is not the first that Pakistan has issued in the past few months. This week's latest escalation could force Pakistan to substitute more costly spot shipments for supplies not coming from Qatar.
Relying on the spot market could expose Pakistan to higher energy costs and uncertainty in its energy supply plans, especially as domestic demand continues to grow.
Pakistan, a country with a population of more than 220 million, has been struggling with a financial crisis in recent years, and having to buy LNG at higher prices could worsen the economic burden.
| Impact of the Hormuz crisis on the LNG market | |
|---|---|
| Consequences | Affect |
| LNG prices increased | Energy costs increase globally |
| Supply shortage | Especially in countries that depend on sea routes |
| Change route | Ships have to take detours, increasing transportation costs |
The crisis in the Strait of Hormuz, the world's most important shipping lane for oil and LNG, continues to pose major challenges to the global energy market, with Pakistan being one of the countries most affected due to its geographical location and dependence on gas supplies from the region.
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