NPD arrangement for FY26: Cabinet clears plan to divert 24-29 surplus LNG cargoes from Qatar

ISLAMABAD: The Federal Cabinet has approved a plan to divert between 24-29 surplus LNG cargoes from Qatar under the Net Proceed Differential (NPD) arrangement for FY 2026, following the Economic Coordination Committee’s earlier endorsement, sources told Business Recorder.

According to officials, the Ministry of Energy (Petroleum Division) informed the ECC on November 7, 2025, that Pakistan currently receives nine LNG cargoes per month under two long-term agreements with Qatar, in addition to one monthly cargo under a long-term contract with Eni.

However, declining gas demand — primarily due to reduced offtake by the power sector — has led to significant surplus LNG within the system, creating storage and financial challenges for Sui Northern Gas Pipelines Limited (SNGPL).

To mitigate the growing imbalance, Pakistan LNG Limited (PLL) and Eni earlier sold 11 surplus cargoes for 2025 on an NPD basis, while the Petroleum Division and Pakistan State Oil (PSO) jointly negotiated a deferral of five Qatar-sourced cargoes for the same year.

With demand continuing to fall, SNGPL and PSO projected that approximately 177 additional cargoes could become surplus between July 2025 and December 2031—equivalent to 24 surplus cargoes per year. As a result, both entities requested engagement with Qatar Energy to reduce or reschedule committed LNG quantities, or seek increased offtake by the power sector.

On August 19, 2025, the Petroleum Division presented a summary to the ECC seeking authorization to initiate discussions with Qatar on several options: (i) mutual reduction of surplus cargoes without compensation; (ii) reduction now, with deferred recovery of the same volume after 2031 by extending contract tenure; (iii) full exercise of NPD for the remaining contract period—requiring a separate summary for Ogra-related policy guidelines; and (iv) contract amendment allowing LNG procured from Qatar Energy to be re-exported or sold on a B2B basis.

Price review clause & quantity: Qatar LNG cargoes delivery strategy discussed

Following ECC’s approval, a high-level delegation—including the Minister for Petroleum, Secretary Petroleum, PM’s Advisor on Privatisation Mohammed Ali, MD PSO, MD SNGPL, and a representative of the Attorney General’s Office—visited Doha from August 25–27, 2025, for negotiations.

Subsequently, detailed consultations were held in Islamabad involving the Petroleum Division, Ministry of Foreign Affairs, AGP Office, SNGPL, PSO, and the Task Force on Power. Stakeholders agreed that the NPD mechanism should initially be applied only for 2026, with future decisions to depend on its results.

In line with contractual requirements, PSO communicated Annual Committed Quantities (ACQs) to Qatar Energy on September 30, 2025. During the designated negotiation window (October 15–November 15), PSO proposed exercising NPD for 29 cargoes for 2026.

The Ministry later informed ECC that Qatar Energy had agreed to proceed with NPD for 24 cargoes—two cargoes per month—while expressing willingness to continue discussions for a more sustainable, longer-term mechanism to handle surplus volumes.

Given this, the ECC was requested to authorize PSO and the Petroleum Division to finalize the Annual Delivery Programme (ADP) for 2026 with a cargo range of 24–29 under NPD. In parallel, Pakistan has also placed 21 Eni cargoes—11 for 2026 and 10 for 2027—on NPD due to the projected supply-demand imbalance.

During deliberations, the Petroleum Division briefed ECC on the persistent LNG demand decline and confirmed that PSO is carrying surplus LNG stock, making NPD the most viable solution available.

The ECC approved the proposal, and the Federal Cabinet has now ratified the decision, clearing the way for Pakistan to proceed with Qatar on diversion of surplus cargoes under the NPD framework.

Copyright Business Recorder, 2025