The Pakistani government is set to approach Qatar for consent to resell liquefied natural gas (LNG) imported from Doha on the spot market if domestic demand falls short. This step is aimed at addressing the challenges posed by a long-term LNG supply contract signed between Islamabad and Doha in 2016, which obligates Pakistan State Oil (PSO) to take supplies regardless of domestic consumption needs. The price revision under this contract is slated for February 2026.
This contractual obligation has caused operational difficulties for Sui Northern Gas Pipeline Limited (SNGPL), especially when there is a mismatch between supply and demand, leading to pipeline issues. According to a senior official from the Ministry of Energy, Islamabad is preparing to use diplomatic channels to either cancel shipments or secure permission to sell surplus LNG on the spot market to alleviate these pressures.
The disclosure was made during a public hearing conducted by the National Electric Power Regulatory Authority (Nepra) on a petition from power distribution companies seeking approval to charge consumers an additional Rs3.41 per unit due to fuel adjustments for May 2024. The hearing highlighted that the actual fuel rate was Rs9.12 per unit, compared to a reference price of Rs5.7 per unit, resulting in a proposed increase.
During the hearing, power distribution companies reported a 5% drop in electricity consumption due to favorable weather conditions, with total demand in May 2024 being only 17,000 megawatts. More electricity was produced using LNG rather than coal, with the cost of LNG-based electricity pegged at Rs24.7 per unit. This unexpected drop in power-sector consumption has increased line pack pressure for gas utilities, highlighting the need for better forecasting of LNG demand.
In May, the country faced critical line pack pressure due to a reduction in the use of Re-Gasified Liquefied Natural Gas (RLNG) by the power sector, which exacerbated transmission risks. Officials at the hearing stressed the importance of forecasting LNG demand months in advance to avoid such issues.
The hearing also touched on the role of net metering in Pakistan’s energy mix, which was noted to be less than 1%. Some intervenors accused the Power Division of downplaying net metering’s significance and suggested that net metering users were actually consuming more electricity from the national grid at night, arguing that criticism against net metering was baseless. They questioned Nepra’s role in providing consumer relief over the past five years and criticized the lack of options for consumers to pay bills in installments.
Additional concerns raised during the hearing included a coal scam at the Sahiwal coal power plant, cases lost by the Central Power Purchasing Agency (CPPA) in international courts, and the rising circular debt in the power sector. However, the CPPA, representing power distribution companies, declined to address these queries during the hearing, stating that they were not pertinent to the current discussion and should be submitted in writing.
The CPPA’s reluctance to engage with these issues underscores broader challenges in Pakistan’s energy sector, which faces multiple pressures from financial constraints, operational inefficiencies, and regulatory complexities. The need for an IMF bailout and adherence to stringent fiscal measures, including increased taxes and levies, further complicates the situation.
The government’s move to renegotiate LNG contracts with Qatar reflects its broader strategy to manage energy supplies more flexibly and align them with domestic demand. By securing the ability to resell LNG on the spot market, Islamabad aims to mitigate the risks associated with fixed long-term contracts and avoid operational bottlenecks that can disrupt gas transmission.
As Pakistan continues to navigate its economic challenges, the energy sector remains a critical area requiring careful management and strategic planning. Ensuring a balance between supply and demand, improving forecasting accuracy, and addressing infrastructure constraints are essential steps towards achieving energy stability and sustainability. The ongoing discussions with Qatar and the outcomes of the Nepra hearings will likely play significant roles in shaping the future of Pakistan’s energy landscape.
