ISLAMABAD: In a major policy shift, the government has decided it will no longer absorb potential losses arising from the diversion of Liquefied Natural Gas (LNG) cargoes under the Net Proceed Differential (NPD) clause and will instead pass the cost on to Regasified Liquefied Natural Gas (RLNG) consumers, The News reported.
A senior Petroleum Division official told The News that Islamabad is in talks with Qatari authorities to divert between 24 and 29 LNG cargoes in 2026 to the international market under the NPD provision.
Under this clause, if a diverted cargo secures a higher price in the global market than Pakistan’s term contract rate, all profits accrue to Qatar; however, if it sells below the term price, Pakistan State Oil (PSO) must bear the loss. Qatar is expected to confirm by November 30 whether 24 or 29 cargoes will be diverted, though officials anticipate the lower figure.
The government has now decided that neither the state nor PSO will bear losses from any low-priced sales. Instead, the cost will be passed on to RLNG consumers, including four RLNG-based power plants, export-oriented industries and new domestic consumers who receive RLNG-based gas connections.
Meanwhile, the Oil and Gas Regulatory Authority (Ogra), in its latest pricing determination, projected a positive impact of Rs48 billion from potential cargo diversions.
The regulator argued that until June 30, 2025, domestic consumers would continue receiving local gas at Rs1,000 per MMBTU, instead of the RLNG-linked price of Rs3,500 per MMBTU. However, questions have been raised about whether Ogra’s calculations accounted for the possibility of diverted cargoes being sold at a loss.
Passing NPD-related losses on to consumers, officials cautioned, will likely raise the RLNG prices across key sectors. RLNG-based electricity generation costs will rise, export industries will face higher fuel tariffs and new domestic consumers seeking RLNG connections will encounter steeper gas bills.
Despite these concerns, the government maintains that if Qatar approved the diversion plan, Pakistan could save around $339.6 million in foreign exchange, based on the term cargo price of $28.3 million per shipment.
Sources said Pakistan’s existing RLNG surplus could have been managed more efficiently earlier this year. In October 2024, multiple meetings at PSO headquarters — attended by officials from Sui Northern Gas Pipelines Limited (SNGPL), Sui Southern Gas Company Limited (SSGCL), PSO and Pakistan LNG Limited (PLL) — recommended diverting 37 LNG cargoes.
Spot prices throughout 2025 were consistently higher than Pakistan’s term contract prices, making diversions commercially attractive. However, PSO did not exercise available contractual options, leading to operational and financial complications.