Govt authorises PSO to finalise LNG diversion deal with Qatar

The federal government has authorised Pakistan State Oil (PSO) to conclude negotiations with Qatar by November 15 for the diversion of up to 24 liquefied natural gas (LNG) cargoes in 2026, amid declining demand and rising surplus inventories, The Express Tribune reported.

According to the Petroleum Division’s briefing to the Economic Coordination Committee (ECC), PSO must close discussions on the net proceeds differential with Qatar Energy before the November 15 deadline. “It is proposed that the Petroleum Division and PSO are authorised to finalise ADP for 2026 with a cargo range of 24 to 29,” the ministry told the forum.

The ECC approved the request and authorised PSO to proceed. The Petroleum Division told the meeting that Pakistan’s LNG consumption had fallen, resulting in a surplus stock. It noted that low offtake by power producers had contributed to renewed demand destruction in the gas system, leaving Sui Northern Gas Pipelines Limited (SNGPL) with excess LNG.

To manage rising inventories, the Petroleum Division and Pakistan LNG Limited had earlier reached an understanding with Eni, under which 11 surplus cargoes were sold in the market in 2025 using the net proceeds differential formula. PSO and the Petroleum Division also coordinated with Qatar Energy to delete several cargoes scheduled for 2025.

A cumulative surplus of around 177 cargoes is projected from July 2025 to December 2031, averaging 24 cargoes a year. To address this, the Petroleum Division submitted a summary to the ECC outlining three options: mutually reducing surplus cargoes; cutting cargoes now and procuring them after 2031 through contract extension; or applying the net proceeds differential formula for the remaining contract period.

The ECC also directed that a separate summary be presented to issue policy guidelines to the Oil and Gas Regulatory Authority on passing the impact of the net proceeds differential to power producers and other LNG consumers.

A government delegation — comprising the petroleum minister, petroleum secretary, PSO managing director, SNGPL managing director, adviser to the prime minister and representatives of the Attorney General’s Office — visited Doha from August 25 to 27, 2025, to advance the negotiations. Subsequent meetings in Islamabad resulted in agreement that the net proceeds differential was the preferred option.

PSO informed the Petroleum Division that Qatar Energy had shown willingness to apply the formula for 24 cargoes scheduled for delivery in 2026 and expressed readiness to continue discussions for a longer-term solution to manage the surplus.

The ECC approved the summary titled “Update on Negotiation with State of Qatar for Mitigation of Surplus LNG”, clearing the way for PSO to finalise the arrangement.