While the current decline in global energy prices would benefit most manufacturing economies, it poses a serious challenge for Pakistan’s export industry.

Over the past few weeks, Brent crude has dropped from ~$75 to ~$65 per barrel, expected to decline even further. Looking ahead, the global LNG market is expected to see a substantial supply influx, with new volumes from Qatar and the United States entering the market in the next 3 years.

This wave is anticipated to exert downward pressure on LNG prices. As global energy prices fall, regional competitors are gaining access to gas at between $5-7/MMBtu.

In contrast, gas for captive power generation in Pakistan is Rs. 4,291/MMBtu ($15.38), including the miscalculated levy of Rs. 791/MMBtu. This puts Pakistan’s exporters at a severe disadvantage.

Countries like Bangladesh — where 80% of the industry runs on gas-based captive power as per an ADB survey — India and Vietnam, will benefit greatly from cheaper gas prices. Similarly, industries in India, China, Bangladesh and Vietnam are paying just 5–9 cents/kWh for electricity, while Pakistani industrial consumers face 11-13 cents/kWh from the grid.

For an energy-intensive and low-margin sector like textiles, this energy cost differential makes it extremely difficult to compete internationally.

China’s recent imposition of a 34% tariff on US LNG has effectively priced American cargoes out of the Chinese market, reshaping global trade flows. Unlike Brent-indexed LNG contracts, which become more competitive as oil prices decline, the pricing structure of US LNG — based on fixed liquefaction fees, Henry Hub pricing, and shipping costs — makes it commercially unviable for Chinese buyers in the current market.

As a result, American cargoes are being diverted to Europe, where the sudden influx has already contributed to a 7.5% drop in TTF prices, tightening the US–EU arbitrage window and straining EU regasification infrastructure.

The move also reinforces China’s long-term strategy to diversify supply through stable, lower-cost alternatives like Australia, Qatar and Russia, while minimizing exposure to volatile spot markets.

A sustained decline in Brent crude prices towards $50 per barrel could create significant headwinds for the US liquefied natural gas (LNG) industry, which operates on a pricing structure based on Henry Hub gas prices plus liquefaction (requiring buyers to pay fixed liquefaction fees take or pay) and shipping costs. This model becomes less competitive when oil-indexed LNG — especially from low-cost producers like Qatar — becomes more attractive in a low-Brent environment.

The global LNG market is also poised for significant structural change by 2030, with approximately 170 MTPA of new liquefaction capacity expected to come online, led by the US and Qatar, with additional volumes from Russia and Canada.

Concurrently, over 65 MTPA of long-term contracts are set to expire, and 200-250 MTPA of LNG — more than half of today’s global trade — will need to be re-marketed or re-contracted by 2030.

Given these factors, LNG prices are expected to further decline in coming months and sustain at low levels.

Meanwhile, Pakistan’s LNG market is dominated by state-owned enterprises which hold long-term Sale and Purchase Agreements (SPAs) under take-or-pay terms. These entities also control import terminals and pipeline infrastructure, creating high entry barriers for private sector participation.

Pakistan currently........

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