Breaking Pakistan’s LNG dependence cycle

Pakistan’s liquefied natural gas (LNG) supply came to a halt in March 2026, when Qatar’s Ras Laffan facility was caught in the crossfire of the United States (US)-Israel war with Iran. The crisis has severely diminished Pakistan’s LNG supply and exposed the country’s over-reliance on long-term contracting.

Since the conflict began, Qatar — which accounts for approximately 20% of global LNG supply and 90% of Pakistan’s LNG supply — has shipped only three cargoes through the Strait of Hormuz to Pakistan. Even if the Strait is fully reopened, 17% of Qatar’s production capacity has sustained long-term damage and will require up to five years to repair.

While a fragile ceasefire holds military tensions temporarily at bay, there is no guarantee that a permanent resolution to the conflict is within reach. Even if an agreement is reached, Pakistan, like other import-dependent countries in the region, faces an uncertain energy future. 

While austerity measures such as fuel rationing and reduced hours for commercial activity are being implemented in Pakistan, the inflationary impacts of rapidly fluctuating global commodity prices are being felt as petroleum prices increase and policy rates are raised.

Despite reduced supplies, Pakistan’s power sector — which consumes almost 70% of imported LNG — has not experienced prolonged fuel shortages due to widespread solarization and various pre-existing generation technologies. But maintaining the same level of electricity supply, particularly during non-solar hours, will be a challenge as the Middle East crisis moves into summer. 

While Pakistan’s growing imports of battery energy storage systems (BESS) could provide much-needed relief during peak hours, a lack of institutional mechanisms and technological bottlenecks prevents their full integration into the existing grid infrastructure. 

LNG shortages due to geopolitical volatility 

The closure of the Strait of Hormuz and the resulting LNG shortage mark the second time in four years that Pakistan has experienced geopolitically induced fuel shocks. In 2022, LNG prices rose to USD70 per million British thermal units (MMBtu) because of the Russia-Ukraine war, pricing Pakistan out of the spot market. Contract suppliers such as Gunvor and Eni defaulted on cargo deliveries to prioritize higher profits in European markets, resulting in extensive power outages and industrial shutdowns.

The government responded by increasing its reliance on imported fuels it could still procure, but high commodity prices pushed up electricity prices by 155% — exacerbating the cost-of-living crisis.

Inflationary pressures aside, the current situation is vastly different from the previous one. Pakistan’s electricity mix is more diverse than in 2022, with a higher installed capacity and a reduced dependence on imported fuels such as furnace oil, imported coal, and LNG. Greater water releases for hydropower generation have also limited outages, increasing hydropower availability from 1,800 to almost 4,100 megawatts (MW). But a shortfall is still expected in the summer, as peak demand usually exceeds 28,000MW.

Rising LNG spot market prices and increased competition 

As the fuel costs of alternative power sources such as furnace oil and high-speed diesel remain elevated, the government is still considering spot LNG procurement as a viable alternative. Yet given Pakistan’s history of spot cargo procurement and with regional buyers like Bangladesh paying up to USD28 per MMBtu on the spot market, Pakistan will face significant price premiums. Pakistan awarded a spot market LNG cargo contract at USD18.4 per MMBtu in April 2026, while Japan-Korea Marker (JKM) futures trended at USD16.5 per MMBtu at the time. Another spot delivery was arranged in June 2026 at USD19.1 per MMBtu while the JKM traded around USD18.8 per MMBtu. At these elevated prices, LNG-based power production could cost up to PKR51 (USD0.18) per kilowatt-hour (kWh), excluding operational costs and fixed capacity charges. 

As the Middle East crisis continues, Pakistan may again be priced out of spot markets due to competition from wealthy buyers in Asia and Europe, while electricity costs are likely to rise. 

Alternatives to the spot market for LNG procurement also pose risks. In 2025, for example, short-term oil-linked contracts of five years or less were typically priced at high slopes of 15–17% (indexed to oil prices). Depending on oil price changes, this would effectively lock Pakistan into high rates for the remainder of the decade. Medium- and long-term contracts of 10–20 years would likely come with lower slopes, but strict take-or-pay requirements would result in costly penalties for decades if Pakistan were to face an oversupply of LNG again. 

With Brent crude prices hovering around USD100 per barrel and LNG prices expected to remain high through 2027, Pakistan’s options for procuring affordable LNG will be significantly limited in the short term. Without a more rapid shift to domestic energy production from solar and other sources, economic hardship and energy insecurity are likely to persist. 

Battery storage as the path forward

Battery storage technologies offer a clear off-ramp for LNG needs, particularly during evening hours. Battery imports to Pakistan could reach 16.1 gigawatt-hours (GWh) by 2030 under accelerated scenarios, providing 54% of projected peak demand. However, battery integration will require proactive measures to prevent grid issues, such as widespread smart meter deployment, consumer and transformer monitoring, and feeder-level automation and modernization. 

Rather than locking in new LNG dependencies, Pakistan can more actively prepare for a clean energy future through careful management of cheaper renewable energy and battery storage integration.

This commentary was first published in East Asia Forum.