Cash-strapped Pakistan cuts power to households on fuel shortage

Pakistan is struggling to procure fuel from the spot market after prices of liquefied natural gas and coal surged to records last month as the war in Ukraine exacerbated supply shortfalls.

Pakistan is cutting electricity to households and industry as the cash-strapped country can no longer afford to buy coal or natural gas from overseas to fuel its power plants.

The South Asian nation is struggling to procure fuel from the spot market after prices of liquefied natural gas and coal surged to records last month as the war in Ukraine exacerbated supply shortfalls. Pakistan’s energy costs more than doubled to $15 billion in nine months ended February from a year earlier, and it isn’t able to spend more on additional shipments.

About 3,500 megawatts worth of power capacity had been shut due to the fuel shortages as of April 13, according to a Twitter post by Miftah Ismail, who has been selected as finance minister by new Prime Minister Shehbaz Sharif. A similar amount is offline due to technical faults, he said. The more than 7,000 megawatts represent almost a fifth of the total generation capacity, according to Tahir Abbas, the head of research at Arif Habib Ltd. in Karachi.

A family sits by its tent in front of DPS thermal power station in Muzaffargah, Punjab Province Pakistan

The electricity crunch is complicating the already tough economic challenge for Sharif — who has yet to appoint an energy minister — after former leader Imran Khan was ousted last week following a period of political turmoil. A relatively poor nation that’s highly dependent on energy imports, Pakistan has been hit especially hard by rising fuel costs.

Pakistan’s long-term LNG suppliers cancelled several shipments scheduled for delivery over the last few months, further tightening supplies. The nation released a tender on Sunday to procure six LNG cargoes from the spot market, but that could end up costing the government hundreds of millions of dollars if fully awarded.

“Pakistan’s situation will not change in the near term since global dynamics are still the same,” said Samiullah Tariq, head of research at Pakistan Kuwait Investment Co. “There have been forced outages to deal with the energy shortages.”

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