The government is finalizing reforms in the gas sector, including the possible reduction of two LNG cargoes per month, as part of efforts to bring circular debt in the sector to zero, Business Recorder reported, citing sources in the Petroleum Division.
The sector’s circular debt currently stands around Rs2.6 trillion, largely due to lower RLNG consumption by the power sector. The International Monetary Fund (IMF) has urged the government to eliminate the circular debt flow.
The fourth meeting of the gas sector reform committee was held on August 8, 2025, under the Petroleum Minister at Task Force Headquarters in Rawalpindi. The meeting included the Advisor to the Prime Minister on Privatization, Secretary Petroleum, and OGRA representatives.
The Petroleum Minister briefed attendees on a recent discussion with the Prime Minister about issues from reduced LNG off-take by the power sector and highlighted the need for a clear strategy ahead of a planned visit to Qatar. Progress of four sub-committees reviewing LNG demand, circular debt management, RLNG tariff components, and revenue requirements of Sui companies was also discussed.
The Secretary Power noted that imported coal-based power plants are currently underutilized, and RLNG-based plants cannot be declared “must-run” without affecting overall generation. Data presented showed that power sector consumption of RLNG could increase by 127–174 mmcfd depending on tariff levels, with financial implications of Rs41–88 billion annually.
The Advisor to the Prime Minister on Privatization suggested revisiting fuel cost comparisons between imported coal and RLNG to determine LNG cargo requirements for 2026. A coordination mechanism between Power and Petroleum divisions was agreed to address short-term demand and off-take issues.
The Task Force is developing a Gas Circular Debt Management Plan (CDMP) with KPMG. Options under review include savings from LNG cargo diversion, levy imposition, incremental SOE dividends, RLNG receivables from the power sector, and waiver of interest payable to gas producers. Committee members emphasized ring-fencing all cash inflows for debt settlement.
The Petroleum Division is reviewing RLNG cost components and terminal utilization, including the impact of reducing two LNG cargoes per month. OGRA is assessing revenue requirements and Return on Asset formulas for Sui companies and conducting a new study on Unaccounted-for Gas (UFG) benchmarks to be completed by November 30, 2025.
Officials confirmed that the Task Force has prepared a roadmap for RLNG supply and pricing, including potential measures to increase domestic gas use and reduce costs for industry and power. A single blended gas price for both sectors is under consideration, and the final report will be submitted to the Prime Minister’s Office.
The main committee is scheduled to meet on August 18, 2025 [today] to review ongoing proposals.
