The government will shift the burden of LNG cargoes to RLNG consumers

• Power plants, exporters, new RLNG users face higher tariffs.
• Ogra’s Rs 48 billion forecast has been questioned amid a potential loss.
• The government reports potential foreign exchange savings of $339.6 million.

ISLAMABAD: In a major policy shift, the government has decided that it will no longer absorb potential losses arising from the diversion of Liquefied Natural Gas (LNG) cargoes under the Net Product Difference (NPD) clause and instead pass on the cost to consumers of regasified liquefied natural gas (RLNG). The News was mentioned.

A senior Petroleum Department official said The News that Islamabad is in talks with Qatari authorities to divert between 24 and 29 LNG cargoes in 2026 to the international market under the NPD provision.

Under this clause, if a diverted cargo fetches a higher price on the world market than the Pakistani forward contract rate, all profits accrue to Qatar. However, if it sells below the term price, Pakistan State Oil (PSO) has to bear the loss. Qatar is expected to confirm by November 30 whether 24 or 29 cargoes will be diverted, although officials expect a lower number.

The government has now decided that neither the state nor the PSO will suffer losses from any low sales. Instead, the cost will be passed on to RLNG consumers, including four RLNG-based power plants, export-oriented industries and new domestic consumers receiving RLNG-based gas connections.

Meanwhile, the Oil and Gas Regulatory Authority (Ogra), in its latest pricing determination, has projected a positive impact of Rs 48 billion from possible load diversions.

The regulator maintained that till June 30, 2025, domestic consumers will continue to get local gas at Rs 1,000 per MMBTU, instead of the RLNG-linked price of Rs 3,500 per MMBTU. However, questions have been raised about whether Ogra’s calculations accounted for the possibility of diverted cargo being sold at a loss.

The pass-through of NPD-related losses to consumers, officials warned, is likely to push up RLNG prices in key sectors. The cost of RLNG-based electricity generation will increase, exporting industries will face higher fuel tariffs and new domestic consumers seeking RLNG connections will face higher gas bills.

Despite these concerns, the government maintains that if Qatar approves the diversion plan, Pakistan could save about $339.6 million in foreign exchange, based on a cargo term price of $28.3 million per shipment.

Sources said Pakistan’s existing RLNG surplus could have been dealt with more effectively earlier this year. In October 2024, several meetings at PSO headquarters — attended by officials from Sui Northern Gas Pipelines Limited (SNGPL), Sui Southern Gas Company Limited (SSGCL), PSO and Pakistan LNG Limited (PLL) — proposed the diversion of 37 LNG cargoes.

Spot prices throughout 2025 have been consistently higher than Pakistan futures prices, making diversions commercially attractive. However, PSO did not exercise available contractual options, leading to operational and financial complications.