Pakistan's Energy Security Threatened by Disrupted LNG Supplies

Pakistan's energy security is under threat due to disruptions in liquefied natural gas (LNG) supplies from Qatar, which have led to a 32% jump in regasified LNG prices for August. This surge in prices is driven by the US-Iran conflict and has exposed Pakistan's import dependence, raising concerns about power costs, inflation, and industrial pressure.

The price increase is not just another fluctuation in international commodity markets but reflects the vulnerability of an energy strategy that relies heavily on imported fuel in an increasingly unstable world. The immediate trigger for the price hike is clear: Qatar has disrupted LNG supplies amid the US-Iran conflict, forcing Pakistan to turn to the spot market where prices are higher and more volatile.

This has pushed RLNG prices to record levels, with inevitable consequences for electricity generation, industrial production, and inflation. Manufacturers already struggling with high financing costs and uneven demand will be further eroded by another sharp increase in energy costs, which will eventually affect households through higher utility bills and rising prices of goods and services.

The government's decision to withhold around Rs50bn in savings arising from lower prescribed gas prices and instead channel these funds towards reducing the gas sector's circular debt is a difficult trade-off for policymakers. While restoring financial sustainability is essential, consumers are being denied immediate relief precisely when imported energy costs are escalating sharply.

The broader lesson is not that Pakistan should abandon LNG, which remains an important component of its energy mix, but that excessive dependence on imported fuels carries mounting risks. The country should continue expanding domestic renewable generation where it is economically viable and accelerate long-delayed improvements in energy efficiency to reduce exposure to volatile spot markets.