South Asia’s $1 Billion LNG Premium—and Why Coal Is Making a Comeback

The $1 Billion Premium South Asia Paid for Gas

Since hostilities escalated in the Middle East five months ago, South Asian economies have spent at least $1 billion more than planned on imported liquefied natural gas, according to Bloomberg calculations. The extra money has gone almost entirely to spot-market purchases at prices roughly double what long-term contracts with Qatar would have cost—just to keep lights on and factories running.

Pakistan and Bangladesh alone have poured nearly $2 billion into at least 30 spot LNG cargoes to replace deliveries that vanished when contractual flows through the Strait of Hormuz were effectively cut off. The same volumes under their existing Qatari term-deals would have cost around $900 million. That gap, exceeding 100%, is now being absorbed by fragile state budgets already strained by debt and currency pressure.

With logistics snarled and standard shipping routes too dangerous, importers have been forced into expensive workarounds. The result is not just a cash crunch: Bangladesh has begun load-shedding across factories and residential areas, while Pakistan has introduced scheduled power outages. The crisis has exposed a core contradiction in the LNG growth story—super-cooled gas was sold to emerging Asia as a cheap, reliable bridge fuel, but in times of geopolitical shock it becomes the priciest option on the market.

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QatarEnergy’s Force Majeure Winds the Clock to September

On 29 July, QatarEnergy—operator of the world’s largest LNG export complex—extended its force majeure declaration for Asian long-term buyers through at least September. That decision removes the certainty that anchored the original investment case for Pakistan’s and Bangladesh’s import terminals. Without contractual volumes, any further spot buying will only deepen the fiscal injury.

When LNG Infrastructure Becomes a Sunk Cost Trap

The crisis underscores a structural weakness. LNG infrastructure is capital-intensive: liquefaction plants costing billions, cryogenic storage, specialist carriers, and regasification terminals. That model works when term-supply is steady and cargoes move predictably. When a chokepoint like Hormuz is disrupted, however, the same infrastructure becomes an expensive obligation—governments must keep buying at any price to avoid complete system collapse.

The Coal Equation Is Reopening

For cash-constrained Asian economies, the numbers are now brutally simple. Coal is indigenous or available from multiple non-Hormuz suppliers, doesn’t require cryogenic logistics, and—crucially—its price isn’t pegged to the spot-panic premium that has hit LNG. Bloomberg’s Asia Energy team lead, Stephen Stapczynski, warns that the premium on super-chilled gas is eroding its long-standing positioning as a “cheap and plentiful” alternative to coal. The longer the current crisis lasts, the more governments will explicitly tilt back toward coal-fired generation, renewables investment and domestic exploration.

Who Actually Gains and Who Loses

Losers: Qatar and other Middle Eastern LNG exporters whose supply reliability is now in question; the trading houses and energy majors that banked on Asian demand doubling by 2035. Gainers: thermal coal exporters—Indonesia, South Africa, Australia—who suddenly look like the stable counterparties; renewable developers who can point to energy security as a reason for faster build-out of solar, wind and battery storage. Pakistan and Bangladesh lose in the short term, but in a perverse way the stress is forcing a rethink that could lower their medium-term dependence on a single chokepoint-bound fuel.

What Power Brokers and Policy Makers Must Reckon With Now

For energy ministries in Pakistan, Bangladesh and comparable emerging importers:

• Harden budgets for the remainder of 2026: assume spot-LNG prices stay at a significant premium over term contracts while force majeure on Qatari supplies persists—at least through September and realistically into Q4.
• Prioritise the re-dispatch of idle or under-maintenance coal plants; even a 10 % increase in coal-fired generation could cap the volume of spot-LNG purchases needed to avoid blackouts.
• Begin direct negotiations with non-Hormuz LNG suppliers (US Gulf, West Africa, future Arctic cargoes) to diversify shipping exposure, even if the delivered price is only marginally better.
• Accelerate the integration of solar-plus-storage tenders that were already in procurement; this crisis is a tangible argument that energy security demands faster renewables deployment, not a retreat.

For international LNG portfolio players and trading desks:

• Stress-test your credit exposure to Bangladesh and Pakistan; the combination of high spot bills and weak local currencies makes payment defaults a real risk.
• Re‑price the “Asian growth premium” embedded in LNG asset valuations—if developing economies shift incremental generation back to coal for the next 2–3 years, the 2030 demand projections need revision.
• Use this dislocation to offer short- to medium-term flexible supply contracts that combine fixed premiums with optionality for buyers, capturing the demand for security while locking in a new client base outside the Hormuz corridor.