ISLAMABAD: The Power Division has reportedly accused the Petroleum Division of taking irrational policy decisions regarding RLNG supply, which, it claims, have not only made the industry unviable but also discouraged local gas production as Oil and Gas Development Company Limited (OGDCL) alone has reported projected losses exceeding $378 million, sources close to the Secretary Petroleum told Business Recorder.
The Oil and Gas Development Company Limited (OGDCL) alone has reported projected losses exceeding USD378 million, Business Recorder has learned.
These startling revelations were made by the Power Division in a communication in which it raised objections to the gas sector circular debt mitigation report prepared by a committee headed by Petroleum Minister Ali Pervaiz Malik.
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In its communication, the Power Division referred to the Cabinet Division’s letter dated October 6, 2025, stating that the recommendations earlier provided by the Power Division as part of the committee had not been incorporated into the committee’s final report.
The Power Division has reiterated the following points for inclusion in the report: (i) formulation of an Integrated Energy Plan (IEP) to address critical central planning challenges along with their corresponding solutions; (ii) preparation of a detailed feasibility study for RLNG and natural gas storage facilities to enhance operational flexibility and ensure energy security, particularly during peak demand periods or supply disruptions; and (iii) constitution of an inter-ministerial committee comprising representatives from the Power Division, Petroleum Division, and Finance Division to conduct a cost-benefit analysis of various options for internal and external sale of RLNG and to present its recommendations to the Cabinet Committee on Energy (CCoE) prior to the finalization of the next Annual Delivery Plan (ADP) with the Government of Qatar.
Regarding the committee’s recommendations, the Power Division submitted that the power sector is already honouring the commitments made in the ADP and is consuming the committed RLNG volumes, which can be duly cross-verified through the evidence provided in the report. In case of any variation, financial settlement is made under the Net Proceed Differential (NPD) clause stipulated in the respective Power Purchase Agreements (PPAs) of the power plants. Additionally, any system constraints are managed through coordination between the system operators of both sectors. Accordingly, the Power Division has urged that the committee’s recommendations be revisited.
According to the Power Division, RLNG surplus is being diverted to domestic consumers at a heavy subsidy, at the expense of the industrial and commercial sectors. This distortion, it argues, has not only rendered the industry unviable but has also discouraged local gas production—OGDCL alone projects losses exceeding $378 million. The Division emphasized that immediate tariff rationalization is essential to restore both sectoral and industrial viability.
The Power Division further noted that rationalizing upstream and handling costs of RLNG, including margins allowed to LNG importers, is essential to lower the landed cost for the power sector. Such cost reductions would enhance affordability and stimulate additional demand.
The Division observed that while the power sector continues to honour LNG off take commitments, declining sectoral demand and the growing share of lower-cost renewable energy may make the current pricing structure unsustainable. Increased RLNG utilization, it added, can be facilitated if the RLNG Fuel Cost Component (FCC) is reduced to competitively replace imported coal on the Merit Order.
While supporting efforts to address circular debt in the gas sector, the Power Division cautioned that excessive reliance on end-consumer price increases could further suppress power sector demand. Any debt mitigation mechanism, it stressed, should be based on a comprehensive cost-benefit analysis—taking into account demand elasticity—to avoid unintended financial and operational impacts on the sector.
In light of the declining demand trend, the Power Division also recommended that the gas sector prioritize dedicated investment in research and development for gas storage infrastructure, such as re-energizing depleted fields. This, it said, would enhance system flexibility and improve demand management, aligning with international best practices.
The Power Division has reiterated that the recommendations of the sub-committee should be made an integral part of the final report and that the power sector’s point of view must be duly incorporated.
Copyright Business Recorder, 2025
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