LNG oversupply strains Pakistan’s energy sector, local fuel quality under scrutiny

Pakistan’s energy sector is facing a significant challenge as the reduced LNG consumption from the power sector creates an oversupply issue for Pakistan State Oil (PSO). 

Despite having long-term contracts for LNG imports with Qatar, the power sector’s plummeting demand—down from 600 million cubic feet to much lower levels—has led to operational difficulties for PSO, according to its Managing Director during a National Assembly Standing Committee on Energy meeting. 

The committee also discussed fuel quality concerns, with government officials highlighting that locally refined fuel fails to meet international standards, despite financial incentives given to refineries for upgrades. 

The Oil and Gas Regulatory Authority (Ogra) confirmed that local fuel refineries were granted benefits to enhance their facilities but have been slow to upgrade. 

Discussions on the deregulation of petroleum products and raising refining margins to encourage upgrades are ongoing, while concerns about high manganese levels in petrol and sulfur in diesel persist, posing health risks.

PSO, under pressure from reduced power sector demand and operational constraints, and local refineries failing to upgrade, now face growing scrutiny from lawmakers and regulatory bodies. 

The energy crisis looms as the government seeks solutions to stabilize the sector and improve public safety through better fuel standards.