Islamabad:
Pakistan on Tuesday decided to seek renegotiation of his floating natural gas (LNG) import agreement with Qatar after its industry slowed down and the power need fell, resulting in over 50 excess loads over the next one and a half years alone.
The deal, which expires in 2031, has left decision makers with two options – hold either its 400 mmcfd per day. Day cheaper local gas production facilities together with the drainage of expensive excess gas for subsidized housing or seek to renegotiate the agreement.
The Cabinet’s Economic Coordination (ECC) has enabled the petroleum department to engage in Qatar to renegotiate the quantities of import to minimize redirecting imported gas to consumers of homes and only import what is required, according to the people who attended the closed doors ECC meeting.
Petroleum Minister Ali Pervaiz Malik is expected to travel to Qatar as the Pakistani authorities are not still sure if Qatar would also be willing to open the quantities of import, the sources added.
Based on the official assessment, there will be at least 51 excess loads worth $ 1.2 billion to $ 1.5 billion from July this year to December 2026, according to sources.
After taking over the office in March this year, Ali Pervaiz Malik has advocated that either the Power Division fulfills his responsibilities by lifting the promised 600 mmcfd -imported gas quota or that there will be no option other than seeking re -processing.
According to a Terse Finance Minister’s statement of the case, “ECC reviewed the overall sector supply situation in the country and instructed the petroleum Ministry to take effective measures to control losses in the sector and ensure operational efficiency”.
The sources said that given the excess imported expensive gas, the government has three options. Pakistan can ask Qatar to reduce the number of monthly loads to about 6 to 7 from the existing 9. The second option is that the government can seek an extension during the expiry period with the request to postpone the delivery of excess loads beyond the original expiry period of 2031.
The sources said the third option for non-performance damage (NPD) is stated in the contract under which Qatar can sell gas to third parties and claim losses from Pakistan if the price of selling the gas is lower than the contract price.
Pakistan is required to pay for contracted LNG volumes even if they are not consumed. The contract provides flexibility to adjust ingestion with up to three loads a year.
The Pakistan-Qatar LNG agreement consists of two major agreements signed in 2016 and 2021, with the aim of accommodating Pakistan’s energy needs through long-term LNG supply contracts.
The sources said Pakistan will have an opening to end the agreement in 2026 if both sides do not agree on a new price on the gas. The 2016 Agreement allows termination after 11 years, which is the year 2027, whose price recovery dealer fails in 2026.
The 15-year-old agreement allows Pakistan to import up to 3.75 million tonnes a year (MTPA) of LNG to tackle its energy deficit. The 2016 agreement had been signed at 13.37% of the Brent crude oil price. Each load corresponds to approx. 100 million cubic foot per Day (MMCFD), a total of 500 mmcfd.
2021’s 10-year agreement gives up to 3 MTPA LNG at a lower rate than the 2016 agreement. It was signed to replace expiring, more expensive contracts and secure security of supply.
The price for the 2021 agreement was 10.2% of Brent -Rå oil, a reduction of 31% compared to the 13.37% interest for the 2016 agreement.
Pakistan has already postponed five loads from the 2016 agreement to 2026 without financial sanctions.
Due to sluggish economic growth causing lower electricity demand from the national network and overall low demand and very insurmountable prices, the government was not in the process of firing power plants, which was one of the reasons for gas importing.
Due to approximately RS3,500 per MMBTU -imported gas price also cannot the government divert the gas to households without incurred large losses.
LNG was primarily imported to meet the demand for the electricity sector, while balance was made available to the industry. LNG sales purchases (SPAs) had 100% roof or wage clause for PSO/PLL, while instead of mirroring the same clauses, the gas supply agreements (GSAs) with power plants were initially performed at 66% of the smallest take-or-pay and later revised to 50% with effect from January this year, the sources added.
Before commissioning these LNG-based power plants, it was assumed that these plants that were most effective would be placed higher in economic meritor (emo) and/or to be declared must-run plants for peak loads that did not happen, they added.
Over time, the demand for the electricity sector has been significantly reduced due to the availability of generation from other sources that have led to problems with excess LNG in the system. This LNG -GLUT in the system has further aggravated with drastic decline in LNG consumption of captivity force due to the imposition of lattice transfer tax.
The sources said that SNGPL has reported that about 11 loads are profits in the period July to December 2025, and similarly for calendar year 2026, approx.
This is turned into $ 1.2 billion to $ 1.5 billion unnecessary import bill for a country if almost 100% currency reserves are based on foreign loans.
The sources said that SNGPL is limited to diverting expensive RLNG to the domestic sector. To deal with the issue of surplus LNG resorts SNGPL to limit gas production Local fields that vary between 250 to 400 mmCFD to maintain integrity and safety of the system due to higher line packing pressure.
Restriction of local production in contrast to the revenue from investigative and production companies in addition to affecting the production of condensate, crude oil and LPG from oil and gas fields, they added. According to the estimated revenue requirements (ERR) for CFY as determined by OGRA, the cost of redirecting RLNG to the domestic sector on the SNGPL network is estimated at RS242 billion against 24 loads, which led to an increase in consumer gas prices, the sources say.
The only option for Pakistan now has to request the fraternal country to review the agreement in the light of this development, the sources added.
