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Prime Minister Shehbaz Sharif said on Friday that Pakistan scrapped the liquefied natural gas (LNG) tender for July that received a single bid of $39.8 per MMBtu to save the country's foreign exchange reserves.

Addressing a meeting on the energy situation, he said that accepting the tender would have drained the low level of reserves.

“We are trying to prop up central bank reserves,” he said. “We imposed limits on import of raw material and machinery to save $2 to $3 billion for Pakistan.”

Pakistan receives bids as it seeks LNG for May-June

Pakistan's liquid foreign reserves have been dwindling for months due in part to debt servicing. However, the reserves received a boost after proceeds of a Chinese loan amounting to RMB 15 billion (roughly $2.3 billion) were received by the central bank. Reserves held by the central bank were $10.3 billion as of June 24.

SBP-held foreign exchange reserves go over $10bn after Chinese loan

Meanwhile, PM Shehbaz stressed that procurement of fuel for energy generation had become a challenge for Pakistan because all commodities - coal, oil and gas - were trading at historic high values in the world.

Oil price recently surged to $118 per barrel and gas rates followed the trend, he said.

“We have to decide how much foreign exchange reserves we have to spend on fuel components and Pakistan cannot afford gas at $39.8 per MMBtu,” he said.

“Majority tenders floated in the international market failed to attract bids which acted as a setback for us.”

Pakistan LNG disqualifies two bids for July LNG spot cargo delivery

He said that a shift of first world countries from Russian oil to LNG in view of the Ukraine crisis lifted energy prices all over the globe.

The prime minister lamented that the previous government failed to capitalise on cheap oil and gas prices and did not sign long-term deals to procure fuel.

“The price of fuel had fallen $3-$4 in the spot market and the previous government could have inked long term deals at $5-$6 per MMBtu,” he said. “If it had entered into an agreement, Pakistan would not be facing the current energy crisis.”

Global LNG: Asia spot prices continue to rise on further market tightening

He noted that the government was in a difficult situation: if the leadership cuts gas to the industry, the production and exports suffer, and if the supply of fuel is halted to the fertiliser sector, then agriculture output is affected.

He said that the government was shortlisting options to deal with the power crisis, and that power plants established under the China-Pakistan Economic Corridor (CPEC) would be used to resolve it.

“We will also open a revolving account with China that the previous government failed to open despite its commitment. China has raised several objections,” he said.

In a tweet after the meeting, PM Shehbaz announced that Karot Hydropower Plant had begun production.

“I am very happy to say that the 720 MW Karot Hydropower Plant has started working,” he said. “In the last four and a half years of the previous government, no significant progress has been made on this test.”

This is the first hydropower project to be completed under CPEC, said the PM, and thanked the Chinese government for its cooperation.

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