Govt weighs spot LNG as Iran war hits supply, ramps up domestic oil and gas

Says the government considers buying ‌liquefied natural gas on the spot market to offset supply disruptions

Minister for Petroleum Ali Pervaiz Malik said on Wednesday that the government is considering buying liquefied natural gas (LNG) on the spot market to offset supply disruptions caused by the Iran war, but would favour government-to-government deals to avoid paying steep premiums.

Qatar's force majeure has forced ​Pakistan to make costly spot purchases or find alternative fuels ahead of summer ​demand.

Spot LNG cargoes have surged to $20 to $30 per mmBtu amid the Middle East ⁠conflict, Malik told Reuters.

Read: 'Country has sufficient petroleum stocks'

Purchases would depend on whether ​prices are acceptable to the power sector, including under existing government-to-government arrangements with Azerbaijan's SOCAR.

Pakistan has ​also been routing some crude supplies via Saudi Arabia's Red Sea port of Yanbu to bypass the Strait of Hormuz, with Malik saying insurance costs on that route were lower than routes crossing or near Hormuz.

The country ​imports nearly all of its oil, much of it via the Strait of Hormuz, and ​remains exposed to supply shocks despite cutting its LNG reliance in recent years, as gas is still needed ‌to ⁠meet the country's peak summer power demand.

It has begun commercial output from its highest-ever producing oil and gas well, as it shores up domestic supply.

"We have arrangements in place to meet domestic and industrial requirements," Malik said, adding that gas disruptions have not led to major curbs, ​with eight of 10 ​fertiliser plants operating.

Also Read: White House says discussing second round of Iran talks in Pakistan

Officials are ⁠also considering the use of costlier fuels such as furnace oil to limit load shedding, although at the expense of higher tariffs. Malik ​warned that prolonged shortages could threaten food security.

The Baragzai X-01 well in ​Khyber-⁠Pakhtunkhwa province is producing about 15,000 barrels of oil per day and 45 million cubic feet of gas, with output expected to rise further, its state-run operator Oil and Gas Development Company Ltd (OGDC) said.

The well ​could reach up to 25,000 bpd and 60 mmcfd ​of gas, making it Pakistan's highest-producing well, and may contribute around 10% of crude output while cutting the country's import ​bill by about $329 million annually, OGDC said.