Pakistan has reportedly filed a lawsuit against an undisclosed foreign company, accusing it of breaching a five-year liquefied natural gas (LNG) supply agreement, resulting in significant financial losses for the country. Sources familiar with the matter, speaking on the condition of anonymity, revealed that the International Arbitration Court in London is anticipated to hear the case next month at Pakistan’s request.
According to the sources, the unnamed foreign company failed to fulfill its commitment to deliver LNG cargoes as per the agreed terms and instead sold them to wealthier nations at a higher profit margin. This alleged breach compelled Pakistan to procure LNG at a higher cost, making it the most expensive in the region. The agreement with the foreign company accounted for 11.62 percent of the Brent price and remained valid until 2022.
In addition to the lawsuit against the undisclosed company, Pakistan reportedly faced similar challenges with two other foreign companies, both of which allegedly failed to meet their LNG supply commitments. While discussions are ongoing with the second foreign company, which had a 15-year LNG agreement with Pakistan until 2032 at 12.14 percent of the Brent price, legal action has not been initiated against them yet.
Pakistan, known as one of the world’s fastest-growing LNG markets, heavily relies on LNG for its power sector, grappling with persistent shortages. Long-term LNG shipments to Pakistan have proven insufficient to match the country’s increasing fuel demand. Despite facing difficulties in securing spot cargoes amid elevated global gas prices, exacerbated by Russia’s invasion of Ukraine, Pakistan imported 9 billion cubic metres (bcm) of LNG last year.
The lawsuit underscores the challenges faced by countries dependent on LNG amid disruptions in the global energy landscape, emphasizing the economic impact and contractual disputes arising from supply chain interruptions.