After us the Deluge
Countries in southern Asia and other developing and emerging countries face a serious energy crisis, as Europe buys up the liquefied natural gas in its power struggle against Russia.
BERLIN/ISLAMABAD (Own report) – The European scramble for liquified natural gas (LNG) threatens to cause a breakdown in the energy supplies of numerous countries in southern Asia and other regions of the world, according to reports from Pakistan, Bangladesh, Thailand and various other countries. Pakistan, for example, can no longer purchase LNG from the spot market, because “every single molecule that was available in our region” has been purchased by Europe, Pakistan’s Petroleum Minister, Musadik Malik said. His government has long since been forced to ration electricity, reduce business hours and, at times, even curtail supplies to some of its industries. The export industry, which had recently been expanding, is now facing serious setbacks. The same holds true for Bangladesh, where – due to LNG shortage – its population must cope with power cuts and its industry with painful production losses. Similar reports are coming out of Thailand and other countries. This is caused by the fact that European states – seeking to deprive Moscow of the revenues from its gas sales – are buying up LNG at the expense of poorer nations.
LNG No Longer Available
Liquefied gas supply threatens to collapse in southern Asia, because European states, including Germany, seek to avoid purchasing Russian pipeline gas, by buying up LNG wherever they can, regardless of the price. In Pakistan for example, the government could not obtain even a single bid in a tender for ten large cargos of LNG worth about US $1 billion. Islamabad's three previous rounds of tenders for LNG cargoes in recent weeks only attracted a single offer. The price of US $40 per MMBtu (million British thermal units, the most common unit for trading LNG) was far above the price of US $12 per MMBtu that Pakistan pays for long-term supply contracts, and well beyond the country's financial means. Islamabad had to reject the bid.[1] Even contractually guaranteed imports have been scrapped. LNG suppliers can now sell at such high prices in Europe that it is profitable for them to divert deliveries promised to Pakistan to Europe and pay Islamabad the penalty of 30% of the supply volume stipulated in the contract.
Electricity will be Cut
This means serious consequences for Pakistan. Almost a quarter of the installed capacity of power plants in Pakistan runs on LNG, official figures show.[2] Due to a lack of supplies, two LNG power plants had to be taken from the grid. Power failures are increasing. The Pakistani government has reduced the number of working hours in the public sector and imposed shorter daily workhours on all establishments, from factories to shopping centers.[3] In the first week of July, extensive plant closures were imposed in Pakistan’s textile industry, to reserve the energy needed for private consumption and the prioritized production of fertilizer.[4] Observers predict that this will reduce Pakistan’s textile industry’s output by 50 percent, which had already previously suffered a 30 percent slump. This not only endangers numerous jobs, but also that industry’s export target, which originally totaled around US $26 bn for the current fiscal year – a huge amount for a country like Pakistan.
“Europe is Sucking the World Dry”
The LNG shortage affects not only Pakistan, but all of southern Asia, as well as Southeast Asia, Africa and Latin America. “Every single molecule that was available in our region has been purchased by Europe, because they’re trying to reduce their dependence on Russia,” Pakistan’s Petroleum Minister, Musadik Malik was quoted as saying.[5] “The European gas crisis is sucking the world dry,” explained an expert at the Wood Mackenzie, consulting firm specializing in energy and natural resources. According to that company, European countries increased their LNG imports by 49%, from the start of the year to June 19, in comparison to the same period last year, and benefit from the fact that they can pay higher prices than the developing and emerging nations, for example in southern Asia. During the same period, Pakistan was obliged to reduce its LNG imports by 15%, India by 16% and even China by 21%, in comparison to that period last year due to a lack of supply.[6]
Upswing in Jeopardy
Sri Lanka is affected, where the shortage of LNG has currently helped escalate the domestic crisis and mass anti-government protests against President Mahinda Rajapaksa, who announced his resignation on the weekend. Bangladesh, which produces nearly half of its electricity with gas – and of that nearly a fifth of that from liquefied gas – also suffers an acute shortage of LNG. LNG is becoming more important, given the fact that domestic production is currently declining.[7] In Bangladesh, like in Pakistan, the sharp hike in LNG prices has a very negative effect on the costs of living and manufacturing, along with the inability to import enough liquefied gas. The last volume of LNG injected into the grid was at half of the amount needed. Also in Bangladesh, electricity is already being rationed, work hours reduced, specifications for diminished air conditioning issued. The industry is also affected. It had just entered somewhat of an upward swing, with growing export successes – reaching, for the first time, a value of over US $50 bn in the last fiscal year.[8] Thus, Bangladesh’s industry’s recent upward trend is seriously in jeopardy.
At the Expense of Climate Protection
Liquefied gas shortages and inflationary prices are plunging countries also in other regions of the world into serious problems – such as in Southeast Asia. Thailand, for example produces nearly two-thirds of its electricity with gas, and of this, one-fifth is from LNG.[9] There also, the drop in domestic gas production has made the importation of liquefied gas strategically important, however, due to the dramatic hike in prices, the necessary volume can no longer be financed. This is all the more serious, given the fact that following the slump caused by the Covid-19 pandemic, tourism and industry are currently picking up again and gas consumption is increasing. In the meantime, the government in Bangkok has decided to postpone the previously scheduled shutdown of particularly climate hazardous coal power stations. State importers have also begun to close the liquefied gas gap by buying and burning diesel and petroleum. This is similar to measures being taken in Pakistan, Bangladesh and numerous other countries, at the expense of protecting the climate – which is also a consequence of the West’s embargo policies against Russia, prioritizing its bitter power struggle against its major rival, over the supply of energy and food to poorer nations. (german-foreign-policy.com reported.[10])
[1], [2] Saeed Shah, Anna Hirtenstein: Europe Scoops Up LNG, Choking Off Power Supplies in Poorer Nations. wsj.com 07.07.2022.
[3] Haris Zamir: Pakistan blackouts widen as energy crisis deepens, fuel prices soar. spglobal.com 15.06.2022.
[4] Pakistan: Textile industrie to remain closed amid shortage of gas supply. aninews.in 01.07.2022.
[5], [6] Saeed Shah, Anna Hirtenstein: Europe Scoops Up LNG, Choking Off Power Supplies in Poorer Nations. wsj.com 07.07.2022.
[7] Faisal Mahmud: Frequent Power Cuts Hitting Bangladesh. voanews.com 09.07.2022.
[8] Nasrul: Use gas and electricity judiciously. dhakatribune.com 06.07.2022.
[9] Stephen Stapczynski, Ann Koh: Thailand at Risk of Fuel Crunch With Imported Gas Too Pricey. bloomberg.com 22.06.2022.
[10] See also The Hunger Crisis (III).
