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European LNG Suppliers Default LNG Shipments To Pakistan But Supply To Their Own Markets As Blackout Surge

By: News Desk

News18.com

Last Updated: June 14, 2022, 15:20 IST

A printing machine worker fans himself with a paper as he stands outside a workshop during a power outage in Karachi, Pakistan (Image: Reuters File)

A printing machine worker fans himself with a paper as he stands outside a workshop during a power outage in Karachi, Pakistan (Image: Reuters File)

Residents in Pakistan face the wrath of the sweltering heat as European LNG supplier default on contracts of LNG fuel supplies to Pakistan

Pakistan, where residents are currently facing 12-hour long power cuts, is facing an energy crisis due to several factors, one of which is the war in Ukraine.

The nation paid close to $100 million to buy a single LNG shipment from the spot market, news agency Bloomberg reported.

The report pointed out that more than the war on Ukraine, it is Europe’s shift to quit Russian fuel that is punishing the citizens far away from Ukraine, leaving them facing unprecedented heat waves.

Pakistan in the last decade took steps to save itself from the spikes in the energy market. One of the fundamental steps it took was to invest heavily in liquified natural gas (LNG). It signed long term contracts with Italian companies and suppliers from Qatar but as the war wages on the suppliers have defaulted.

The Bloomberg report said that the Italian company Eni SpA and trading house Gunvor Group Ltd to supply the country with LNG for the next decade. Eni defaulted on the deliveries but it was found that it fulfilled the demands of the European market but failed to deliver it to Pakistan which is being forced to redirect existing natural gas repositories to power plants and giving less fuel to fertilizer makers who depend on the fuel as a feedstock.

Earlier LNG suppliers looked at Pakistan as an emerging market for the fuel. Developed economies also lowered their use of LNG but the war in Ukraine meant that Europe would need more energy and thus began the crunch on developing economies.

Steve Hill, executive vice president at Shell Plc, the world’s top trader of the fuel, while speaking to Bloomberg said that Europe is sucking the world’s LNG. “That means less LNG will go to developing markets,” Hill was quoted as saying by news agency Bloomberg.

Pakistan also charges them 30% cancellation fees for the missed shipments but those will offer no reprieve as the prices in the European spot market are high enough to more than offset those penalties.

This also emboldens Russia as poorer nations facing inflation due to the ongoing pandemic and war turn to Moscow for cheaper fuel, further blunting the impact of sanctions imposed on the country by the US and its western allies.

Despite this, Pakistanis across the country suffer in the summers as planned power cuts of more than 12 hours are expected to continue.

(with inputs from Bloomberg)

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first published:June 14, 2022, 15:20 IST
last updated:June 14, 2022, 15:20 IST