Islamabad just blinked and the price is going to be paid on dinner plates and factory floors all over Pakistan in the coming days. State-owned Pakistan LNG Limited cancelled an emergency tender for a single LNG shipment which was expected to arrive at Port Qasim on September 8 this week after it received a bid from BP at $27 per million Btu, about three times the price Pakistan had been paying before the Middle East war caused global gas markets to turn upside down. The government decided that the price was too high and they chose to get out. What this really means is more rolling outages during the late hours of the night, when the nation's increasing solar generation stops producing and gas-fired generation should fill in the gap.

It is important to remember how bizarre this is since 18 months ago, Pakistan's issue was with the opposite of LNG. With power demand abnormally low and a solar boom forcing the country to rely on surpluses, the officials had to postpone cargoes, cut back on gas supplies for local consumption and finally just sell dozens of shipments to other markets to avoid being damaged by the physical gas network. Islamabad has been diverting 24 Qatari and 11 Eni cargoes with the help of the Institute for Energy Economics and Financial Analysis by 2026, and they expected a trade surplus of 177 cargoes by the early 2030s. This crisis arrived on a backdrop of a nation with too much gas to import, and then there was not enough.

It was geography and geopolitics doing what geopolitics does to geography. The shock waves from the attack on Iran and Tehran's response to the United States and Israel who attacked the country in response to its efforts to choke traffic through the Strait of Hormuz, a 33-kilometre waterway through which roughly a fifth of the world's oil and gas flow hit Karachi almost immediately. In early March, Iranian drones attacked Ras Laffan complex, the world's largest LNG export base, in Qatar. QatarEnergy declared the force majeure, which put an end to its delivery duties, and further extended the force majeure into October.

Israel proceeded to attack Iran's South Pars field in the Gulf, the world's biggest gas reserve. Exports of Qatari LNG dropped by 91 percent in May compared with the previous year. That was not a hypothetical situation for Pakistan, as 99 per cent of the country's LNG imports come from Qatar and the UAE, whereas the other countries in the region have a much more diversified sourcing portfolio and hence do not have that same level of concentration risk.

The figures speak for themselves. In most of 2025, cargo arrivals averaged between 8 and 12 per month but dropped to 2 in March, the month of the war. The average price that the Pakistani state entities were paying was $10.47 per MMBtu on February 13, before the worst of the disruption. By the end of July, Pakistan LNG had to accept the price in the spot market, which was a record $20.70, the highest in four years. It would have been the highest price of the week, $27, that was rejected. In volume terms, August was even worse, with Islamabad making no spot purchases that month and only one cargo that arrived under the long-term Qatar deal compared to the five spot purchases Islamabad had made in July.

The monetary risk is far greater than what the gas ministry can afford. The urea industry, which relies on subsidised gas feedstock, has already seen its supply suspended by the government by limiting gas access to the industry at a rate of around 78 million cubic feet a day, and is now facing a risk of urea production over the coming days and weeks given its reliance on this critical sowing period for an economy that still generates a significant proportion of employment in the agriculture sector.

The country's two LNG terminals have reduced regasification capacity to just one-fifth of its normal levels. Pakistan has been trying to repair its foreign exchange reserves, which it has been using to pay for the LNG imports, for over a year, and has limited room to add further strain to its currency. Domestic gas cuts go directly toward competitiveness in the industry while textile and cement firms were just starting to rebuild volume.

Global consultancies such as S&P Global, ICIS, Kpler and Rystad Energy have reduced their supply forecasts by up to 35 million tonnes based on the disruption and damage to the LNG exports from the Hormuz region and to Qatari liquefaction facilities that some analysts believe may take three to five years to fully recover. It's a chilling reminder in a nation where energy security has always depended on the continued uninterrupted flow of energy from the Gulf on schedule. China has insulated itself by using pipeline Russian gas and building its own reserves. Lesser price-sensitive Japan and South Korea are doing a relatively good job of weathering the storm. There is no buffer in Pakistan comparable to it and that’s the contrast.

There really is a silver lining in the crisis one that can be brought to the forefront more. Pakistan's solar industry has grown at a rapid pace, not as a result of government policies but due to the demand of the rooftop market and has significantly reduced the use of imported fuel during the day and ensured uninterrupted power supply during peak hours when one expected gas or oil backup. The space left unfilled is clearly an evening issue, when the sun is not producing electricity and gas is having to take up the extra space that the scale-up of space batteries has not yet filled.

The underlying message in the tender rejection is as much about the contract's design as it is about the war. The two long-term Qatar deals in Pakistan are yet to expire, and they are expected to hold around 6.75 million tonnes of gas per year irrespective of demand fluctuations which is the very rigidity that caused last year's high gas glut and this year's high gas scramble in the same breath.

When the power sector is so volatile from one surplus to another deficit, a country should ensure that the procurement is flexible, more batteries are installed to meet peak demand in the night and it has adequate physical storage so that it can absorb the next shock akin to the Hormuz crisis without being entirely dependent on one single sole bidder at every tender.