Pakistan, Qatar review LNG contract

Pakistan, Qatar review LNG contract

Pakistan and Qatar have agreed to review a multimillion-dollar liquefied natural gas (LNG) supply agreement as Pakistan faces a growing surplus of gas and declining demand.

The two sides have already agreed to divert 24 LNG cargoes to other destinations under the current year’s delivery plan, according to sources.

Sources said Pakistan State Oil (PSO) and QatarEnergy have issued notices to review their existing LNG agreements. PSO is now seeking approval from the federal government to proceed with the contract review.

Pakistan and Qatar currently have two LNG sale and purchase agreements, both of which will remain in effect until 2031. The first agreement covers 15 years from 2016 to 2031, while the second runs for 10 years from 2021 to 2031.

The second agreement, signed during the Pakistan Tehreek-e-Insaf (PTI) government, has faced criticism because Pakistan’s LNG requirements had already started declining, contributing to a supply surplus in the domestic market.

Both agreements were signed under a government-to-government framework and require PSO to receive around 6.75 million tonnes of LNG, equivalent to 108 cargoes, each year.

The contracts operate under “take-or-pay” terms, meaning Pakistan remains responsible for payments even when it does not require the contracted volumes. The agreements also provide limited flexibility to divert surplus cargoes.

Under the existing arrangement, any profit generated from selling diverted LNG cargoes abroad goes to QatarEnergy, while PSO bears the financial losses associated with the transactions.

The surplus became more pronounced as LNG demand from the power sector declined, leaving additional supplies in the Sui gas system.

In response, the government authorised PSO in 2023 to negotiate with QatarEnergy for reducing LNG deliveries by two cargoes per month.

Following those negotiations, Pakistan reduced 24 cargoes from its 2026 annual delivery schedule. The Attorney General’s Office also provided legal guidance to PSO regarding the contractual arrangements.

The latest review initiative could provide Pakistan with greater flexibility to manage LNG imports in line with domestic demand and reduce the financial pressure caused by excess contracted supplies.