ISLAMABAD: The Petroleum Division is facing a complex policy challenge after the Independent System and Market Operator (ISMO) sought further reductions in nearly 10 additional RLNG cargoes for 2026—beyond already adjusted volumes—raising concerns about a potential breach of the Integrated Generation Capacity Expansion Plan (IGCEP).
According to senior officials, Special Secretary Petroleum Mirza Nasiruddin Mashhood Ahmad, in a letter to the Power Division, referred to ISMO’s December 13, 2025 communication that revised downward the RLNG demand for the power sector for calendar year 2026.
Under long-term LNG Sale and Purchase Agreements (SPAs) with QatarEnergy, the Annual Delivery Plan (ADP) must be finalised by October 15 for the following year. The RLNG demand for 2026 had already been confirmed in line with IGCEP projections during meetings co-chaired by Minister for Power Sardar Awais Ahmad Khan Leghari and Minister for Petroleum Ali Pervaiz Malik. These figures were also incorporated into a Wood Mackenzie study to determine Net Proceed Differential (NPD) cargo volumes. Consequently, the ADP was finalised with QatarEnergy on November 30, 2025.
However, ISMO’s subsequent revision could result in a surplus of around 10 LNG cargoes, creating a divergence between IGCEP requirements and updated demand projections. The Petroleum Division argues that further changes at this stage are not feasible and could trigger operational complications.
Officials noted that earlier demand revisions have already caused high line pack pressures in the gas system and forced curtailment of around 200 MMCFD of indigenous gas to maintain system integrity. “To avoid potential damage to gas fields and revenue losses for oil and gas companies—as well as reduced non-tax revenues for the government—the Power Division should adhere to agreed IGCEP volumes,” the Special Secretary stated. He advised managing intra-day and inter-day fluctuations within a 5–10 percent tolerance band.
Meanwhile, the Federal Cabinet has approved diversion of 24–29 surplus LNG cargoes from Qatar under the NPD mechanism for 2026 due to declining gas demand, primarily from the power sector. The surplus has compounded financial and operational challenges for Sui Northern Gas Pipelines Limited (SNGPL).
To manage excess supply, Pakistan LNG Limited (PLL) and Eni sold 11 surplus cargoes during 2025 under the NPD arrangement, while the Petroleum Division and Pakistan State Oil (PSO) negotiated deferral of five Qatar-sourced cargoes.
Projections by SNGPL and PSO suggest that around 177 additional cargoes could become surplus between July 2025 and December 2031—averaging nearly 24 cargoes annually. Both entities have recommended engaging QatarEnergy to reduce or reschedule committed volumes or increase power sector offtake.
On August 19, 2025, the Petroleum Division submitted a summary to the Economic Coordination Committee (ECC), seeking approval to open formal discussions with QatarEnergy. Proposed options included mutual reduction of cargoes without compensation, deferred recovery beyond 2031, full exercise of the NPD mechanism under OGRA guidelines, or amendment of agreements to allow re-export or business-to-business LNG sales.
A high-level delegation led by the Petroleum Minister visited Doha in late August for negotiations, followed by inter-ministerial consultations in Islamabad. Stakeholders agreed to initially utilise the NPD mechanism for 2026 while evaluating its effectiveness for longer-term surplus management.
Subsequently, PSO placed 29 cargoes under the NPD mechanism during the October 15–November 15 negotiation window. QatarEnergy agreed to 24 cargoes—two per month—under NPD, with further discussions to continue. The ECC later authorised finalisation of the 2026 ADP within a 24–29 cargo range under the NPD arrangement.
Additionally, 21 cargoes contracted with Eni—11 for 2026 and 10 for 2027—have also been placed under NPD due to projected supply-demand imbalances.
The Petroleum Minister has reportedly taken a firm position that bilateral and trilateral LNG contracts and pricing arrangements will not be breached due to planning lapses, underscoring the government’s commitment to contractual obligations amid growing demand uncertainty.
Story by Mushtaq Ghumman
