PM Says July LNG Tender Was Scrapped to Preserve Forex Reserves

Pakistan didn’t go ahead with the July LNG tender of $39.8 per MMBtu in order to preserve its forex reserves.

According to Prime Minister Shahbaz Sharif, accepting the tender would have finished off the low level of reserves. He made these remarks while addressing a meeting on the national energy situation.

He said, “We are trying to prop up central bank reserves. We imposed limits on importing raw materials and machinery to save $2 to $3 billion for Pakistan”.

On a broader note, the PM emphasized that obtaining fuel for energy generation had become difficult for Pakistan because all commodities were trading at historically high prices throughout the world.

He said, “We have to decide how much foreign exchange reserves we have to spend on fuel components and Pakistan cannot afford gas at $39.8 per MMBtu. The majority of tenders floated in the international market failed to attract bids which acted as a setback for us”.

PM Shahbaz said that the transition of first-world countries away from Russian oil and toward LNG as a result of the Ukraine crisis raised global energy prices. He also used the occasion to blame the previous government’s failure to capitalize on low fuel costs by signing long-term contracts.

“The price of fuel had fallen $3-$4 in the spot market and the previous government could have inked long-term deals at $5-$6 per MMBtu. If it had entered into an agreement, Pakistan would not be facing the current energy crisis”, he asserted.

In his concluding remarks, the Prime Minister said the government was in a tough situation: if the leadership limits gas to industry, production and exports falter, and if fuel supplies to the fertilizer sector are cut off, agricultural output suffers. He revealed that the government was evaluating ways to resolve the electricity problem, and that power plants built as part of the China-Pakistan Economic Corridor (CPEC) will be utilized to address it.