Pakistan’s struggle to cope with a surge in spot Liquified Natural Gas (LNG) prices may raise the risk of power rationing this winter, Bloomberg News reported.
The country canceled LNG tenders multiple times during the last few months due to higher-than-expected bid prices.
Similarly, with prices at a seasonal high, Bangladesh plans to not buy LNG cargoes during the rest of the year.
A senior Oil and Gas Analyst at BCS Global Markets, Ron Smith, said, “With spot prices so high and with relatively low development, these countries may not be able to afford the current sky-high prices for gas on the global market”.
Such countries may have to either switch to energy production that is less environmentally sustainable or cut down on the production the electricity of electricity.
Smith added that it “seems quite possible” that Pakistan and Bangladesh may face power rationing this winter.
While cash-strapped nations are shunning spot LNG purchases, that is unlikely to have a serious impact on suppliers, which tend to deliver most of their shipments via long-term contracts.
In India, companies have reduced spot buying but still continue to procure some shipments for industrial sectors that are willing to pay the higher rates.
In contrast, higher spot LNG prices have not phased more developed Asian countries like Japan and South Korea, as they have passed costs on to richer customers.
The Head of LNG at the Energy Analytics company Vortexa, Felix Booth, remarked that cheaper fuel prices may offset the rise in spot LNG prices.
Fuel oil prices in Asia hovered around $11.60 per Metric Million British thermal unit (MMBtu) on 31 August, according to the Bloomberg data, which is about $7 below spot LNG prices.
Analysts forecast that spot LNG prices will surge to record highs this winter, with the supply shortage of natural gas expected to worsen as the demand for heating spikes.