Cutting take-or-pay liabilities: PD told to submit plan for RLNG lifting at Rs2000/MMBTU

ISLAMABAD: The Petroleum Division has asked the Power Division to provide a firm plan for lifting Regasified Liquefied Natural Gas (RLNG) at a price of Rs 2,000 per MMBTU, as part of Islamabad’s broader strategy to reduce “take-or-pay” liabilities associated with RLNG contracts—similar to recent efforts made to curtail capacity payments to both private and state-owned power plants, sources in the Petroleum Division told Business Recorder.

The move comes amid concerns that domestic gas fields are being shut down to accommodate surplus, high-cost RLNG in other sectors, including residential consumers. Power plants have been unable to utilize their committed RLNG allocations due to lower electricity demand and constraints under the National Power Control Centre’s (NPCC) Economic Merit Order (EMO).

A senior Power Division official acknowledged the financial burden of the take-or-pay LNG contracts and confirmed that efforts are underway to reduce these liabilities, akin to the strategy used for capacity payments to Independent Power Producers (IPPs) and Government Power Plants (GPPs).

Ogra increases prices of imported RLNG for October

Due to limited domestic demand—driven largely by high RLNG prices—the government has diverted some LNG cargoes to the international spot market and rescheduled others with Qatar. The SNGPL network is also facing line-pack pressure due to underutilization.

In a recent communication with the Power Division, the Petroleum Division referred to discussions during meetings of the National Task Force on Power and the Committee on Structural Reforms in the Petroleum Sector, where multiple scenarios for enhanced RLNG usage were examined. These demand scenarios were evaluated at various RLNG price points.

“Since the Petroleum Division is currently working on optimizing LNG supplies, it is requested that the Power Division indicate firm RLNG volumes it can commit to at Rs 2,000/MMBTU,” stated Hussain Mubashir, Deputy Director (NG-III), in his official correspondence. “The Power Division should also share any alternative price levels that could ensure higher off take to facilitate optimal planning.”

Meanwhile, Petroleum Minister Ali Pervaiz Malik firmly opposed proposals to abandon Pakistan’s long-term LNG contract with Qatar, stressing that Islamabad values its strategic relationship with Doha. He clarified that any renegotiation on price should not be interpreted as a readiness to reduce committed volumes.

During the last week of August 2025, he visited Qatar and discussed different options to reschedule LNG cargoes to reduce financial burden on Pakistan State Oil (PSO).

A preliminary proposal to revisit the Qatar LNG agreement had surfaced ahead of the Minister’s planned visit to Qatar, amid persistently low RLNG consumption by the power sector compared to contracted volumes. Notably, differences have emerged between the Petroleum and Power Ministries over this issue.

During a recent meeting of the Committee on Structural Reforms in the Petroleum Sector, chaired by the Petroleum Minister, Naveed Qaiser of the Power Planning and Monitoring Company (PPMC) presented a comparative analysis of Energy Purchase Prices (EPP) between imported coal and RLNG.

According to the data, the power sector currently consumes around 340 mmcfd of RLNG—a figure expected to fall to 175 mmcfd by 2031. The analysis estimated additional RLNG consumption of: (i) 174 mmcfd at Rs 1,500/MMBTU; and (ii) 127 mmcfd at Rs 2,000/MMBTU; and (iii) 95 mmcfd at Rs 2,209/MMBTU.

Copyright Business Recorder, 2025