Pakistan has purchased its most expensive liquefied natural gas (LNG) shipment in approximately four years as it grapples with an energy shortage caused by the closure of the Strait of Hormuz. According to a Bloomberg report, Pakistan LNG Ltd., a state-owned procurement body, acquired an LNG cargo for delivery on June 6-7 from British oil company BP Plc through a tender that closed on Thursday.
Qatari shipment cancelled amid tensions
A scheduled Qatari shipment was cancelled amid escalating tensions around the Strait of Hormuz, leaving Pakistan with no alternative but to turn to the spot market. Traders with knowledge of the transaction confirmed that the cargo was secured at $19.1337 per million British thermal units, the highest rate Pakistan has paid for LNG since 2022. This acquisition marks the country's second spot purchase in roughly two years, having entered the spot market for the first time in that period only in April.
Impact of Middle East conflict
Pakistan is paying a heavy cost due to the ongoing Middle East conflict. Roughly one-fifth of global LNG supply remains trapped behind the Strait of Hormuz, which has been effectively closed following a blockade by Iran and the United States. As Qatar supplies nearly all of Pakistan's LNG imports, the disruption has triggered rolling blackouts across the country since hostilities commenced in late February. Over the past month, Islamabad negotiated the passage of three Qatari LNG shipments through the strait with Iranian consent, the last of which arrived in late May. While the arrangement has offered some help, inbound volumes remain well below normal levels.
Limited prospects for resolution
Prospects for a near-term resolution appear limited. Peace talks between Iran and the US have stalled, and the current week has seen the sharpest escalation in regional violence since a fragile ceasefire came into force in early April.
High inflation from surging energy costs
Pakistan's inflation reached a two-year high in May, driven in significant part by surging energy import costs. The consumer price index rose 11.7 per cent year-on-year, in contrast with the 10.9 per cent recorded in April. The inflationary strain has compounded financial hardship for public-sector workers. Leaders of the All Government Employees Grand Alliance (AGEGA) Punjab have called for substantial relief measures ahead of the Federal Budget 2026-27, citing a marked deterioration in the purchasing power of government employees, according to reports.
