By SKM
July 15, 2025
ISLAMABAD: Trapped by LNG glut, Pakistan has geared up to initiate talks with Qatar seeking permission to divert some of the imported gas cargoes to the international market as additional number of LNG vessels has increased to 30 per year mainly because of steep the reduction in gas consumption in the country on account of lower GDP growth and massive increase in gas prices, a senior official of Petroleum Division told The Exclusivewaves.com.pk.
“The government is already diverting one LNG cargo from ENI – an Italian company a month to the international market from February 2025 and the diversion will continue till December 2025. After that Pakistan LNG Limited and ENI will decide as to whether diversion should continue or not in 2026.”
Despite diversion of one LNG cargo from ENI per month, the government has failed to absorb the RLNG being imported from Qatar under two long-term agreements as the exports sector has reduced the imported gas by 250 mmcfd to just 100 mmcfd from 350 mmcfd as the price of gas for captive power plants (CPPs) has increased to Rs4291 per MMBTU (Rs3500 plus 5% off-the-grid levy).
The four RLNG power plants installed in Punjab, for which 2 long-term LNG supply contracts were signed with Qatar on GtG basis and two contracts were inked with Gunvor and ENI—LNG trading companies. In addition, a huge infrastructure including two LNG terminals and LNG gas pipeline was constructed, but unfortunately, RLNG power plants are not being utilized at the optimum level by the Power Division.
The Power Division, however, says if it runs the RLNG power plants, the basket price of electricity will increase. And running the RLNG power plants does not come in Economic Merit Order when local gas-based, nuclear, hydel and coal-based electricity is available in abundance. Most of the time, the line pack in the main LNG pipeline stays over 5bcf that puts the national gas distribution network in jeopardy all the time. The 5bcf is a danger mark at which the national gas distribution can burst any time.
And to manage the line pack pressure, the government has reduced the intake of local gas in the system by 250 mmcfd putting the depleting gas wells in danger zone as in the past such wells when got closed could not be revived with natural pressure even after the million[h1] s of dollars investment and they (gas wells) sank.
This has put the top mandarins of the petroleum division on a tight rope and they have decided to initiate talks with Qatar authorities during the period from October 15 to November 15, 2025 when Annual Delivery Plan (ADP) for import of LNG cargoes for 2026 will be finalized with authorities in Qatar.
“Yes, we will undertake talks with Qatar during the window of October 15 to November 15 and seek permission from Qatar to divert some of the cargoes to the international market to avert the LNG glut and line pack pressure in the main LNG pipeline. Under the provisions of two agreements with Qatar, the import of LNG cargoes can be deferred.
And to this effect, Qatar has already deferred the import of five LNG cargoes to 2026 which were destined to reach in 2025. As far as the diversion of LNG cargoes to the international market, there is a clause of NPD (Net Proceed deficit) under which if the LNG cargo from Qatar is diverted to the international market at loss, then Pakistan will have to absorb the whole loss which can go up to $10 million per cargo which includes the operational cost. In addition, Pakistan will also have to pay the loss incurred to Qatar. So it is tricky business and we have to complete homework on how the international market of LNG will behave and if prices go down than the prices locked with Qatar, then Pakistan will have to absorb the loss of $10 million per cargo and if the prices are higher in international spot market, then the profit will be shared between the two countries.
The official also said that by March 2026, the price opening clause of both agreements will be invoked which will enable Pakistan to continue the agreements or not. If the market prices are lowered in March than the 13.37 percent of Brent for LNG agreement with Qatar for 15 years, 10.02 percent of Brent for 10-year contract with Qatar, Pakistan will ask Qatar to reduce the prices and if market prices are at higher side, then Qatar may ask Pakistan to match it for remaining period of the agreements. “In case of dispute, Pakistan can abandon the agreements. However, Pakistan can also ask Qatar to lay off some cargoes as its consumption has gone down.” Ends
