Soaring LNG prices are adversely affecting Pakistan's balance of payments and threatening the nation's post-COVID economic recovery. Pakistan's trade deficit has widened to nearly $12 billion in July-September 2021 quarter, up more than 100% from the same period last year. The nation's heavy reliance on expensive imported energy has been the main cause of prior balance of payments crises that have forced it to seek IMF bailouts more than a dozen times in the last 70 years.
|Global Commodity Price Increases
The average LNG price for November delivery into Northeast Asia was estimated at about $32 per metric million British thermal units (mmBtu), up nearly 20 percent from the previous week, according to the Peninsula Qatar publication
. Price agency S&P Global Platts said on Thursday that its Japan-Korea-Marker, which is widely used as a benchmark for spot LNG contracts, rose to $34.47 per mmBtu.
Rising LNG prices have forced power generating companies in Pakistan, Bangladesh and the Middle East to start switching fuels pushing oil prices higher. About 60% of Pakistan's current LNG needs are covered by long-term contracts at significantly lower prices than the current spot prices. US crude closed above $80 for the first time since late in 2014, bringing its climb since the end of last October to 125%, according to the Wall Street Journal
The key to Pakistan managing its current accounts lies in reducing reliance on imported energy and dramatically increasing its exports. Pakistan already faces climate change pressures forcing it to change its energy mix to reduce the use of fossil fuels.
|Pakistan's Malik Amin Aslam with CNN's Becky Anderson
Malik Amin Aslam, Pakistan Prime Minister Imran Khan's special assistant on climate change, said recently in an interview with CNN that his country is seeking to change its energy mix to favor green. He said Pakistan's 60% renewable energy target would to be based on solar, wind and hydro power projects, and 40% would come from hydrocarbon and nuclear which is also low-carbon. “Nuclear power has to be part of the country’s energy mix for future as a zero energy emission source for clean and green future,” he concluded. Here are the key points Aslam made to Becky Anderson of CNN:
1. Pakistan wants to be a part of the solution even though it accounts for less than 1% of global carbon emissions.
2. Extreme weather events are costing Pakistan significant losses of lives and property. Pakistan is among the countries most vulnerable to the effects of climate change.
3. Pakistan is moving towards renewable energy by converting 60% of its energy mix to renewable by 2030. Electric vehicle (EV)
transition is also beginning in his country.
4. Aslam said: “We are one of the world leaders on nature based solutions. However, the World Bank (WB) in its Report yesterday came up with really good numbers in a comparison done of countries who are shifting their mainstream development towards environment friendly policies and Pakistan came atop among them,” the SAPM explained.
To a question on Pakistan’s capacity to make investments in nature based solutions, he said, “We cannot afford not to do it….that’s a cliche in our country and we are living that cliche in Pakistan. We are not just talking the climate talk rather doing climate action in Pakistan.”
To a question on the 26th Conference of Parties (COP-26) under the United Nations Framework Convention on Climate Change, Amin said his country’s revised "national determined contributions" (NDCs) are going to be released next week. “….that’s going to clearly tell the world that this (money) we had spent in nature and could do further and that was also our direction,” he added. The SAPM informed that Pakistan was going to COP 26 with a very clear message that the country has been affected by climate change, climate injustice, adding, “but we are one of the countries that are leading the way to nature based solutions.”
He cited the WB Report and said 44% of the country’s mainstream development was climate friendly investment and it had doubled in the past one year. He said 60% renewable energy target would to be based on solar, wind and hydro power projects, and 40% would come from hydrocarbons and nuclear which is also low-carbon. “Nuclear power has to be part of the country’s energy mix for future as a zero energy emission source for clean and green future,” he concluded.
It's noteworthy that Pakistan's neighbor India currently generates 70% of its electricity from coal extracted from Indian coal mine. It is aiming for renewables and nuclear energy to account for 40% of its installed electricity capacity by 2030.
Here's a video of Malik Amin Aslam's interview with CNN"s Becky Anderson:
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