The cost Pakistan is incurring from Russia: Petrol

 

The cost Pakistan is incurring from Russia

 

Keywords: Pakistan petrol, Russian Petrol, Petrol Price

 

Pakistan has a 15-year take-or-pay agreement with Qatar as well as some private suppliers in Italy, according to a recent liquefied natural gas (LNG) report (2020-21) published by the State Bank of Pakistan.

87% of Pakistan's LNG imports are made up of contractual purchases, and the other 13% are spot purchases. As a result, Pakistan is required by contract to buy 87 percent of the goods, and the government can only find favourable deals for the remaining 13 percent.

By 2030, only 22.3 percent of the market's demand will be satisfied by Pakistan's natural gas supply, according to estimates from the Ministry of Energy and the Oil & Gas Regulatory Authority. Between 2016–17 and 2019–20, the country's overall power generation costs were reduced by almost Rs234 billion thanks to LNG imports.

The confrontation between Russia and Ukraine has prompted plans in Europe to forbid Russian gas and oil. The supply of LNG in the EU, UK, and US was constrained by the ban on Russian petroleum. Using the phrase "energy security" has been bandied about before.

Russia invaded Georgia in 2004. Russia then invaded and seized the Ukrainian region of Crimea once more in 2014. Although it was proposed, there was no action taken to outlaw inexpensive Russian petroleum products. It's possible that at the time, the cost of Russian energy supplies was deemed to be too low for them to take any action in the area of energy security. However, not this time since Russia encroached on European territory.

Qatar recently announced intentions to increase its LNG producing capacity by 64 percent by 2024 in order to take advantage of recently discovered gas supplies in response to increased demand. Several other nations that produce natural gas, including Canada, Mozambique, and other West African nations, have also stated similar development goals.

It appears that prospective LNG use will continue to grow in the relatively near future (assuming natural gas production volumes and price policies stay stable). With no indications of a consistent fall, Europe's import volumes have risen by approximately 50% so far this year compared to the same period last year. The construction of floating import docks is progressing quickly in Germany and the Netherlands, and the first ones should open in the following six months.

LNG used to be an affordable alternative energy source for Pakistan. However, this is no longer the case due to the EU, UK, and USA's renewed enthusiasm for LNG in contrast to cheap Russian petroleum products. Recently, the state paid close to $100 million on a single LNG shipment from the spot market to ensure steady electricity delivery during the Eid holidays.

Residual Fuel Oil (RFO) and coal-based power generation are two alternatives that the government is examining, according to Syed Zakria Ali Shah, joint secretary and ministry of energy focal point (Petroleum Division). "Some advances regarding the import of coal from Afghanistan have occurred, and the Cabinet has also just approved."

Pakistan is negotiating the import of gas with Iran as an alternative. Iran is a possible alternative for Pakistan as the EU is considering buying gas from Iran rather than Russia.

Putting aside the political and global ramifications, the price of Iranian gas will skyrocket if Europe starts importing it. Therefore, Pakistan could strive to negotiate a contract for a longer length (i.e. 5–10 years) for the import of gas from Iran and play its cards wisely while taking geopolitics into consideration.

Ammar Habib Khan, Chief Risk Officer at Karandaaz Pakistan, stated that "LNG is only going to get more expensive, but that's mostly in the spot market." Since they are still in the 11–13 percent range of the crude price, we should aim to secure as many long-term contracts as we can.

Despite being the talk of the town, unpredictable renewable energy has always been a challenge. Power can only be produced when there is enough sunlight or when the wind is strong enough to move the turbine blades.

Over time, technology has improved for storing energy produced by renewable sources. This has been made possible by the quick growth of predominantly wind and solar energy production capacity, which has driven down the cost of renewable energy to the point that it is now competitive with coal and natural gas, giving utilities viable alternatives.

Pakistan has no choice but to deal with inflation in the short term. But we also need to prepare for the winter, when there is a greater demand for gas due to higher heating needs in the US and the EU, which drives up costs. Typically, the summer season is a slow one, but not this time. For the winter and the upcoming five years, we must make early plans.