The LNG market: Russia has gone far

Alexey Belogoryev, Deputy Principal Director on Energy Studies of the Institute for Energy and Finance, commented to the Expert publication on the prospects for Russian LNG supplies to Pakistan.

“Pakistan imported LNG for the first time in 2015. Prior to this, consumption was covered by a rather large domestic production, but since 2013, the latter has been declining. Therefore, it can be attributed to the number of still "young" markets. In 2021, imports amounted to 8.19 million tons per year (+10.5% yoy). And its share in the world LNG trade reached 2.2% - 10th in the world and 6th in Asia," Alexey Belogoriev reminded.

He noted that the long-term growth in supplies for Pakistan rests on the limited free capacity of the two operating LNG terminals: in 2021 they were loaded at 83.6%.

“However, now the difficulties are on the supply side - due to the abnormally high demand for LNG in Europe, Asian consumers have actually found themselves in a severely scarce market. At the same time, the main problem is too high LNG prices, for which Pakistan was clearly not ready, like many other poor countries that have recently joined this market. In the future, this may lead to destimulation and contraction of demand. Therefore, Pakistan is now trying to solve two problems: to ensure sufficient supplies of LNG in 2022-2023 in order to avoid an internal energy crisis (the power industry in Pakistan is dominated by thermal power plants, half of which burn gas, the other half - fuel oil); conclude long-term contracts that are advantageous in terms of price,” said Alexey Belogoryev.

The expert believes that, in theory, Russian LNG can be used to solve both problems.