The Iran war has exposed Pakistan's "over-reliance" on long-term contracts to obtain liquefied natural gas, the Institute for Energy Economics and Financial Analysis said in a report on Thursday.
The country has received only three cargoes from major LNG supplier Qatar since the start of the conflict, the report notes, with tight supplies having prompted austerity measures to slash demand.
Summer peak power demand is expected to be 28 gigawatts, which could reveal fuel shortages in the power sector and prompt more LNG procurement on the spot market at prices that would increase gas-fired power generation two- or three-fold.
IEEFA argues that battery energy storage is a viable way for Pakistan to reduce LNG dependence, with the potential to cut consumption in the evenings when solar power output is absent.
The country's LNG supplies were cut off in March after Qatar's Ras Laffan LNG facility was hit in the crossfire of the US-Israel war with Iran, IEEFA said.
Qatar was until then the supplier of 90% of Pakistan's LNG imports and Qatari gas accounted for about 20% of all global LNG supply.
Even if the Strait reopens, 17% of Qatar's production capacity has suffered damage so serious that it will take up to five years to repair, IEEFA notes.
Pakistan has taken measures including fuel rationing and reduced trading hours in a bid to reduce energy consumption but this has not been enough to ward off inflation and monetary policy has been tightened through higher interest rates as a result.
The power sector, which is the end user of 70% of Pakistan's imported LNG, has not faced shortages so far due to the rapid growth of photovoltaic solar generation of late but night time power demand will rise as summer arrives.
IEEFA says that institutional mechanisms and technological bottlenecks stand in the way of integrating battery energy storage into Pakistan's existing grid infrastructure.
The need to pursue this alternative is underscored by the fact that this is the second energy crisis Pakistan has faced in four years. Russia's invasion of Ukraine in 2022 and a resulting LNG price surge priced Pakistan out of the spot market at the time.
Contract suppliers Gunvor and Eni at the time reneged on committed deliveries to Pakistan to earn larger profits by delivering to European buyers, resulting in power outages and industrial shut downs, IEEFA said.
It also resulted in a 155% increase in the cost of electricity, pushing up the cost of living.
But much has changed sinc 2022, with PAkistan having reduced its reliance on fuel imports since then and it has increased usage intensity of its hydropower assets. The country is expected to see shortages in power availability over the summer nonetheless.
Importing more LNG on the spot market, as a work-around, would prove costly, with buyers like Bangladesh paying $28 per million British thermal units recently,.
Costs for power generation with gas could rise to about $0.18 as a result excluding operational costs and fixed capacity charges, IEEFA said.
Entering into contracts for periods such as five years could also lumber the country with higher energy prices after the resolution of the Iran war, the analysts note.
IEEFA argues that Pakistan should accelerate efforts to boost domestic energy production from solar to prevent potential hardship and energy insecurity which it says are likely to persist by pursuing any other path.