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Pakistan is at high risk of facing an energy crisis after it decided to hold off on buying expensive liquefied natural gas (LNG) cargoes until early next year, Bloomberg has reported. Singapore-based commodity trading company Trafigura Group had earlier offered to supply the cash-strapped South Asian country with LNG for January and February delivery at an approximately 30% premium. However, Pakistan LNG Limited decided not to buy the cargo, in part due to the heavy price tag.
The development comes after Pakistan received a $3 billion bailout from the International Monetary Fund (IMF) in July to help alleviate its chronic cash shortage and save its economy. Back in June, Pakistan’s petroleum minister Musadik Malik revealed that the country paid for its first imports of discounted Russian crude in Chinese currency. According to Malik, the purchase, the first government-to-government (G2G) deal between Pakistan and Russia, consisted of 100,000 tonnes, of which 45,000 tonnes have already docked at Karachi port.
The arrangement was convenient for Pakistan considering that the country has been facing a severe shortage of foreign exchange reserves and risks defaulting on its debt obligations. Pakistan has long been a close Western ally and an arch-rival of neighboring India, which itself has massively ramped up imports of cheap Urals.
But it’s not all doom and gloom for Pakistan's energy sector: leading Pakistani state-owned companies are set to partner with Saudi Aramco in the giant $10-billion Greenfield Refinery project at Gwadar Port. Pakistan’s Oil and Gas Development Company Limited (OGDCL), Pakistan Petroleum Limited (PPL), Pakistan State Oil (PSO) and Government Holdings Private Limited (GHPL), will collaborate through a joint investment strategy in setting up an integrated refinery petrochemical complex with a processing capacity of a minimum of 300,000 barrels per day (BPD).
The project is likely to secure Pakistan oil supplies from a more friendly nation.
By Alex Kimani for Oilprice.com
Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com.