By Staff Reporter
ISLAMABAD: Pakistan is wrestling with a costly oversupply of liquefied natural gas (LNG) from a second long-term deal with Qatar, originally intended to shore up energy security but now forcing the government to weigh revising the agreement.
The surplus has disrupted the nation’s gas supply balance, sidelined cheaper local production, and threatened domestic producers with annual losses of $378 million.
The agreement, inked by the Pakistan Tehreek-e-Insaf (PTI) government of former prime minister Imran Khan, locked in an initial supply of 200 million cubic feet per day (mmcfd) from Qatar, ramping up to 300 mmcfd in 2023 and 400 mmcfd in 2024, with the contract spanning a decade.
What was meant to bolster energy reserves has instead flooded the market, leaving Pakistan scrambling to manage the excess.
Petroleum Minister Ali Pervaiz Malik laid bare the predicament during an informal media briefing on Thursday. “There is an issue of demand and supply in the country regarding LNG,” he said. “The RLNG has created significant distortions, compelling us to manage supply by cutting cheaper local production.”
Malik said the government has had to suspend 300 mmcfd of indigenous gas output to accommodate the pricier imported LNG.
The minister pinned part of the problem on sluggish uptake by the power sector. “There will be no surplus RLNG if the power sector takes its committed volume,” he said, underscoring a disconnect in the energy chain that’s left the surplus piling up.
He didn’t mince words about the Qatar deal’s role in the mess. “If there has not been such LNG contract, we might not be facing the current situation of default in the gas sector,” Malik admitted.
The fallout is already hitting Pakistan’s energy market hard. Reuters reported last week that the country is hunting for buyers for excess LNG cargoes, with the glut potentially costing domestic producers $378 million a year.
Pakistan is sitting on at least three surplus cargoes from Qatar, its top supplier, and has resorted to offloading natural gas at steep discounts to local users, according to a second government official.
The shift in power generation trends isn’t helping. Data from energy think-tank Ember shows gas-fired plants, once a cornerstone of LNG demand, have seen output drop for three straight years through 2024.
Cheaper solar power has surged ahead, eating into the market share of gas-fired generation and leaving less room for LNG consumption. Domestic producers are feeling the squeeze.
State-owned Oil and Gas Development Company Limited (OGDCL) warned in a May 29 presentation that “excess LNG in the gas network has resulted in significant production operations impact for local exploration and production companies over last 18 months.”
The oversupply has forced curtailment of local supply, with OGDCL estimating the domestic industry could lose $378 million over the next 12 months if the trend holds.
Pakistan is now exploring creative fixes, including transferring LNG cargoes to rented tankers for offshore storage and eventual resale, according to OGDCL’s presentation. But hurdles loom. It’s uncertain whether Pakistan’s contracts with QatarEnergy permit reselling cargoes, as Qatar typically embeds destination clauses in its long-term deals to limit where buyers can redirect shipments.
“The country is still exploring ways to do it,” one government official said. In a stopgap move, Pakistan has deferred five contracted LNG cargoes from Qatar without penalty, pushing delivery from 2025 to 2026 as it grapples with the surplus.
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