Pakistan has urged Qatar to divert 24 of its contracted liquefied natural gas (LNG) cargoes to the international market in 2026, amid declining domestic demand and an oversupply of gas in the country, The News reported on Saturday.
The move comes as Pakistan’s LNG infrastructure faces constraints, with storage and distribution capacities under strain due to lower-than-expected demand from the industrial and power sectors.
The Petroleum Division officials involved in the annual delivery plan discussions say the proposal will be finalised by the end of October. The request falls under the net proceed differential (NPD) clause in Pakistan’s long-term LNG agreements with Qatar.
While the clause allows for the resale of excess cargoes, it offers little financial relief: Qatar retains any profit from international sales, while Pakistan must absorb any losses if the spot market price is lower than the contract rate.
“By contrast, Pakistan’s agreement with Italian energy firm ENI includes a more favourable NPD clause, allowing for profit and loss sharing with Pakistan LNG Limited (PLL). As a result, the government is already diverting one ENI cargo per month to the international market in 2025 and plans to continue this practice in 2026, excluding the month of January.”
Pakistan currently imports nine LNG cargoes from Qatar each month, five under a 15-year contract priced at 13.37% of Brent crude, and four under a 10-year contract priced at 10.2% of Brent. Both agreements are based on rigid "Take-or-Pay" terms, which require payment regardless of whether the gas is consumed.
These imports were originally intended to supply four RLNG-based power plants in Punjab, which are now running at significantly reduced capacity.
Due to a sharp decline in demand, Pakistan is facing an annual surplus of 35 LNG cargoes, including 11 from ENI. This oversupply has triggered operational challenges, with excessive gas accumulation in the RLNG pipeline system.
In recent months, line-pack pressure has surged past 5.17 billion cubic feet (bcf), exceeding the 5 bcf safety threshold and raising alarms over a potential system failure.
To mitigate the risk, authorities have shut down domestic gas fields producing between 270 and 400 million cubic feet per day (mmcfd). However, this solution carries its own dangers.
Officials of exploration and production companies warn that some wells may suffer permanent damage after closure, and the shutdowns are already affecting the production of crude oil and liquefied petroleum gas (LPG).
Attock Refinery Limited has cautioned the Petroleum Division that a drop in crude oil supply is hampering its ability to operate at full capacity.
The collapse in RLNG demand has been particularly severe in the power and export sectors. As of October 17, the power sector is consuming just 486 mmcfd — far below its committed 800 mmcfd.
The export-oriented industries have cut back even more drastically, with RLNG usage plummeting from 350 mmcfd to only 100 mmcfd.
Officials attribute the decline to high RLNG prices, currently around Rs3,500 per MMBtu, and an additional 5 per cent off-grid levy of Rs570 per MMBtu.
The four major RLNG-based power plants, Haveli Bahadur Shah, Balloki, Bhikki, and Trimmu, were designed to operate as "must-run" units with a 66 per cent take-or-pay obligation, based on their high efficiency levels of 62%. However, in 2020, the Economic Coordination Committee (ECC) approved a reduction in this requirement to 50%.
As per Power Division, the plants now operate under the Economic Merit Order, which dispatches power only from the cheapest available sources, rendering RLNG less competitive.
This shift in energy dispatch has created a financial headache for the Petroleum Division and state-run Pakistan State Oil (PSO), which is responsible for managing LNG imports. In fiscal year 2024–25 alone, the government was forced to divert RLNG worth Rs242 billion to the domestic sector to manage the excess supply.