ISLAMABAD: Pakistan is to table four options before the Qatari authorities for rationalization of LNG cargoes due to limited available flexibility for cargo reduction options, sources close to Petroleum Minister told Business Recorder.
At a recent meeting of the ECC, the Ministry of Energy (Petroleum Division) briefed the forum that the Government of Pakistan (GoP) and the Government of State of Qatar had signed MoU in 2015 for supply of LNG to reduce gas deficiency in the country.
Subsequently, M/s Pakistan State Oil (PSO), a designated entity of GoP, had executed two Sale Purchase Agreements (SPAs) with Qatar Energy on Take-or-Pay basis in 2016 and 2021. Both SPAs, concluded under a Government-to-Government (G2G) arrangement, were approved by the ECC/ Cabinet.
Pakistan faces LNG glut: minister
M/s PLL, through competitive bidding, had awarded a fifteen-year contract to M/s Eni for supply of one LNG cargo per month starting from 2017 which are as follows: (i) PSO-Qatar Energy (2016-SPA-1, five cargoes per month (15 years) with price (slope of Brent) 13.37 percent; (ii) PSO-Qatar Energy (2016-SPA-2(10 years) four cargoes at 10.2 percent slope of Brent; and (iii) PLL-Eni (2017) -15 years, one cargo per month at 12.05 percent slope of Brent.
The Ministry of Energy (Petroleum Division) further informed the ECC that due to various challenges, there was serious demand destruction. M/s Sui Northern Gas Pipelines Limited (SNGPL) faced an issue of surplus LNG, creating RLNG glut in the system.
The ECC was apprised by the Ministry of Energy (Petroleum Division) that M/s Sui Northern Gas Pipelines Limited (SNGPL) reported that demand from Regasified Liquefied Natural Gas (RLNG) based power plants, generally captive power plants, had been reduced after increase in Captive tariff and imposition of Off-the-Grid levy.
According to Sui Northern Gas Pipelines Limited’s projected demand-supply position, approximately 177 LNG cargoes would be expected to become surplus during the period from July 2025 to 2031. Therefore, M/s Pakistan State Oil and M/s Sui Northern Gas Pipelines Limited requested that the matter be taken up with Qatar Energy for reduction of number of LNG cargoes.
According to Petroleum Division, under both Sales Purchase Agreements between Pakistan State Oil and Qatar, Pakistan State Oil had to receive 6.75 metric tonnes per annum LNG (approx. 108 cargoes) during each contract year. Sales Purchase Agreements between Pakistan State Oil and Qatar are Take-or-Pay in nature.
Momentarily, to mitigate the issue of surplus Liquefied Natural Gas due to decreased demand and low-off take by power sector, the gas production from local/ indigenous fields is being curtailed to avoid Take-or-Pay demurrages against Liquefied Natural Gas Cargoes, but on the other hand exploration and production companies had raised concerns about possibility of reservoir damage due to curtailment of gas production from local oil & gas fields.
Petroleum Division argued that Sales Purchase Agreements between Pakistan State Oil and Qatar provided limited flexibility for cargo reduction. As per Pakistan State Oil, the cumulative flexibility available in both the Sales Purchase Agreements with Qatar was capped at 10 cargoes throughout the contract period.
As per Sales Purchase Agreements, Pakistan State Oil may request for reduction of five Cargoes in any contract year by notifying before 1st October for the upcoming year. Under the said provision, PSO had exercised the option of Annual Downward Flexibility Quantity (ADFQ) and deferred 05 cargoes for year 2025.
The relevant provision for ADFQ and Cumulative Downward Flexibility Quantity (CDFQ) in SPA-1 and SPA-2 were available in the summary, respectively. Further, under the agreements, PSO cannot dispose-off cargoes in any manner except Net Proceed Differential (NPD) which again require prior agreement to finalization of Annual Delivery Plan (ADP) for next contract year.
Copyright Business Recorder, 2025
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