Govt mismanagement of LNG imports leads to Rs242 billion burden on consumers: report

The government’s mismanagement of liquefied natural gas (LNG) imports has led to a Rs242 billion burden on consumers in the current financial year, with a reduction in LNG offtake by captive power plants (CPPs) and decreased demand from power plants exacerbating the issue, according to a report by The Express Tribune. 

The Oil and Gas Regulatory Authority (Ogra) has determined that the costs of diverting re-gasified LNG (RLNG) to domestic consumers on the Sui Northern Gas Pipelines Limited (SNGPL) network have resulted in higher gas prices, which took effect from July 1, 2025.

LNG was primarily imported to meet the power sector’s demand, with the remaining supply allocated to industrial and captive plants. However, the LNG sale-purchase agreements contained a 100% take-or-pay clause for PSO and PLL, whereas gas supply deals with power plants were initially signed with a minimum 66% take-or-pay clause, later revised to 50% starting January 1, 2025.

The revision of these agreements has caused tension within the Petroleum Division, with the petroleum minister publicly blaming the Power Division for the LNG glut. 

Before the commissioning of LNG-based power plants, it was expected that these plants, being the most efficient, would be prioritized in the economic merit order and designated as must-run plants. However, as the availability of electricity from other sources increased, LNG demand from the power sector declined, contributing to the current surplus.

The government has already approved a policy to increase the allocation of newly discovered gas to third parties from 10% to 35% to alleviate the glut and promote market competition. 

However, exploration and production (E&P) companies have been forced to curtail supplies by 250 to 400 million cubic feet per day (mmcfd) due to this issue. Although the private sector is willing to accept the curtailed gas, opposition from certain lobbies has stalled the implementation of the policy.

The policy, initially approved in January 2025, has not yet seen any gas allocations to third parties. SNGPL’s decision to divert LNG to domestic consumers, valued at Rs242 billion, will be recovered from consumers as part of the revenue requirement for the current financial year.

E&P companies have raised concerns with the government about the curtailment of indigenous gas supplies, which have caused significant financial losses. Additionally, government-nominated buyers, Pakistan State Oil (PSO) and Pakistan LNG Limited (PLL), have long-term LNG supply contracts with Qatar Energy and Eni, respectively, for importing 10 cargoes per month, equating to 1,000 mmcfd.