Pakistan’s energy crisis is worsening as disrupted LNG supplies and soaring spot prices force Islamabad to choose between expensive fuel and deeper blackouts. With solar unable to meet evening demand, electricity shortages and higher bills are hitting consumers. The crisis highlights Pakistan’s vulnerability to concentrated LNG supplies and Middle East instability.
Pakistan is facing a worsening electricity crunch after rejecting an emergency liquefied natural gas (LNG) cargo at nearly three times pre-war spot prices, leaving the country with an increasingly difficult choice: pay a steep premium for fuel or risk more power cuts across cities.
State-owned Pakistan LNG Ltd. scrapped an emergency tender for a shipment due by September 8 after receiving a sole offer from BP Plc at $27 per million British thermal units (MMBtu), traders told Bloomberg. The government rejected the bid as too expensive and may reissue the tender later
This highlights how sharply the cost of replacing Pakistan’s disrupted Qatari supplies has risen as LNG flows through the Strait of Hormuz remain constrained amid the ongoing US-Iran war.
Also read: Pakistan in the dark again: 4,000 MW shortfall and fuel failures unleash crippling blackouts
Without additional LNG, Islamabad may have to continue rolling blackouts during the evening hours, when Pakistan’s rapidly expanding solar fleet stops generating power and fossil-fuel plants meet the remaining demand. The country has already been grappling with an energy crunch since the conflict in Iran began in late February, disrupting LNG flows from Qatar, its largest supplier.
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The latest setback comes as QatarEnergy extended force majeure on LNG supplies to Pakistani buyers into October. LNG shipments through the Strait of Hormuz remain close to a standstill, even as some oil tankers have begun using alternative methods to move crude through the waterway.
The disruption has exposed a central vulnerability in Pakistan’s energy system: despite making progress in reducing dependence on imported fuel, the country still relies on LNG to bridge the gap between domestic electricity generation and demand, particularly after sunset, according to a factsheet released by the Institute for Energy Economics and Financial Analysis.
Source: IEEFA
LNG shortage deepens Pakistan’s power problem
Pakistan’s dependence on Qatar has made the disruption painful. Qatar supplied about 90% of Pakistan’s LNG under two long-term contracts indexed to Brent crude, with slopes ranging between 10.20% and 13.37%. The contracts were designed to provide relatively predictable supplies, but the Middle East crisis has shown the limits of relying on a concentrated supply base when geopolitical disruptions affect the entire route through which those cargoes travel.
The loss of those supplies has pushed Pakistan back into the spot market. According to IEEFA, the country imported seven spot LNG cargoes between April and July, including one at $21.88/MMBtu — the highest price Pakistan had paid for a cargo since the 2022 Russia-Ukraine energy crisis. Landed Qatari LNG prices also rose from $7.7/MMBtu in March to $13.1/MMBtu in June.
The latest $27/MMBtu offer from BP would take that price shock even further. It also illustrates the problem Pakistan faces in the spot market: when cargoes become scarce, the country has to compete with wealthier buyers in Europe and Asia that have greater capacity to absorb higher prices. For an economy already sensitive to foreign-exchange pressures, securing fuel is therefore not simply a question of availability, but affordability.
Also read: Six months into Iran war, almost half of global oil flows from war zones
The impact is already feeding into the cost of electricity generation. According to IEEFA, the marginal cost of LNG-based power generation rose from PKR19 per kilowatt-hour in February, before the conflict began, to PKR32/kWh in July.
That leaves Islamabad facing a costly trade-off. Buying expensive LNG can keep power plants running but risks raising generation costs, electricity tariffs and the government’s financial burden. Rejecting costly cargoes, meanwhile, conserves scarce foreign exchange but increases the risk of power shortages when alternative sources cannot meet demand.
Solar is cushioning the crisis, but not completely
India’s neighbour has rapidly expanded domestic power sources, particularly distributed solar, while increasing the contribution of hydropower, local coal and nuclear generation. That diversification has allowed Pakistan to avoid the prolonged fuel shortages that accompanied the earlier crisis.
This rapid solarisation has acted as a buffer against the LNG disruption. Greater availability of hydropower and other domestic generation has further reduced the need to burn imported fuel during the day.
But the benefit has a clear limit: solar production falls sharply in the evening, just as household and commercial electricity demand remains high.
That makes the evening peak the weakest point in Pakistan’s evolving energy system. Summer electricity demand is expected to exceed 28,000 MW, and meeting that demand during non-solar hours could require additional LNG procurement.
The government’s rejection of the $27/MMBtu cargo therefore comes at a particularly difficult moment, when the country needs flexible generation precisely when its cheapest new source of electricity - solar - is unavailable.
Source: IEEFA
Power shortages are already reaching households
The strain is already visible on the ground. Karachi residents in several parts of the city have reported outages lasting as long as 16 to 24 hours, with rights groups warning that prolonged load-shedding is disrupting household activities, education, work and access to water.
The electricity shortfall has also spread beyond Karachi. Pakistan’s nationwide power deficit has reportedly crossed 4,000 MW, while consumers in Lahore and other parts of Punjab have faced two to three hours of load-shedding, according to an ANI report. The Lahore Electric Supply Company has been dealing with a reported shortfall of more than 1,200 MW, with repeated tripping incidents adding pressure to the network.
The shortage comes with an additional cost for consumers.
Pakistan’s National Electric Power Regulatory Authority approved a PKR0.75 per-unit increase under the monthly fuel cost adjustment mechanism for June, adding to pressure on electricity bills as the cost of generation rises.
For a country where energy affordability has already been a source of economic and political pressure, the prospect of simultaneously higher electricity costs and less reliable supply is particularly difficult. The government's policy response has therefore increasingly focused on reducing demand as well as securing alternative supplies.
Pakistan has introduced targeted fuel subsidies for vulnerable groups, including bikers, farmers and the transport sector, as policymakers try to prevent the energy shock from feeding too sharply into household and business costs.
Batteries could close Pakistan’s energy gap
Battery storage could become an important part of that solution. With solar already meeting a large share of daytime electricity needs, batteries can store excess generation and release it during the evening peak, reducing the need to turn to LNG-fired plants precisely when imported gas is most expensive.
IEEFA has identified battery energy storage systems as a way to reduce evening peak demand and emergency LNG procurement. But wider adoption would require changes to the electricity grid, including greater deployment of smart meters, better monitoring of consumers and transformers, and automation and modernisation at the feeder level.
The transition also needs to account for Pakistan’s past experience with LNG. The country had accumulated a contracted LNG surplus even before the current crisis, with agreements that could have left it with as many as 177 excess cargoes by 2032. That means simply replacing today's shortage with new long-term LNG contracts could recreate another problem once geopolitical disruptions ease and domestic demand remains weaker than expected.
Pakistan’s exposure to the Gulf extends beyond energy
In fiscal year 2024-25, Saudi Arabia accounted for $9.4 billion in remittances to Pakistan, while the UAE contributed another $7.83 billion, according to the United Nations Development Coordination Office report. This underscores the region’s importance as a source of foreign exchange.
Prolonged instability in the Middle East could therefore put pressure on two of Pakistan’s key economic lifelines at the same time: energy imports and remittance inflows.
The immediate priority for Islamabad is to manage the coming months without allowing the LNG shortage to turn into a broader electricity crisis.
In the longer term, the country needs a smaller, more diverse and flexible LNG portfolio, while accelerating domestic renewable generation, battery storage and grid modernisation.
The world cannot determine when the Strait of Hormuz will reopen, when Qatari LNG shipments will resume or how long global gas prices will remain elevated. What countries like Pakistan can control is how much of its power system remains exposed to those external shocks.
