Pakistan to propose LNG cargo rationalization to Qatar amid RLNG surplus

Pakistan will present four options to Qatari authorities for rationalising LNG cargo deliveries due to limited flexibility under existing agreements, Business Recorder reported. The move comes as the country faces a glut of regasified liquefied natural gas (RLNG), driven by reduced demand from captive and power-sector consumers.

At a recent Economic Coordination Committee (ECC) meeting, the Petroleum Division briefed that the Government of Pakistan (GoP) and Qatar had signed a 2015 memorandum of understanding for LNG supply to reduce the nation’s gas deficit. Pakistan State Oil (PSO) subsequently executed two Take-or-Pay Sale Purchase Agreements (SPAs) with Qatar Energy in 2016 and 2021, both approved by the ECC and Cabinet.

Separately, Pakistan LNG Limited (PLL) awarded a 15-year contract to Eni in 2017 for one cargo per month through competitive bidding. Under the combined arrangements, PSO-Qatar SPA-1 supplies five cargoes per month at a Brent slope of 13.37%, SPA-2 provides four cargoes at 10.2%, and PLL-Eni delivers one cargo at 12.05%.

According to the report, the Petroleum Division highlighted that declining demand, particularly from RLNG-based power plants after increases in captive tariffs and imposition of Off-the-Grid levies, has created a surplus. Sui Northern Gas Pipelines Limited (SNGPL) projects that around 177 LNG cargoes will remain excess between July 2025 and 2031. PSO and SNGPL have requested Qatar Energy’s consent to reduce the number of cargoes.

Under the SPAs, PSO is contractually obligated to receive 6.75 million tonnes of LNG per year (approximately 108 cargoes), with only limited flexibility for reductions. Cumulative flexibility under both agreements is capped at 10 cargoes over the entire contract period, with an Annual Downward Flexibility Quantity (ADFQ) of up to five cargoes per year. PSO has already deferred five cargoes for 2025 under this provision.

To temporarily manage the surplus, production from local gas fields has been curtailed to avoid Take-or-Pay penalties. However, exploration and production companies have warned that prolonged reductions could damage reservoirs.

The Petroleum Division noted that SPAs allow no disposal of cargoes except through Net Proceed Differential (NPD), which requires prior approval in alignment with the Annual Delivery Plan (ADP) for the upcoming contract year. These contractual limitations constrain Pakistan’s ability to adjust LNG deliveries despite projected oversupply.