Government to reduce LNG imports from Qatar

Pakistan’s government is seeking to reduce its liquefied natural gas (LNG) imports from Qatar, aiming to ease the pressure on gas utilities and address the issue of circular debt. The country currently imports 10 LNG cargoes per month, with Pakistan State Oil (PSO) importing nine from Qatar and one from ENI. However, Sui Northern Gas Pipeline Limited (SNGPL) has asked PSO to defer three LNG cargoes each month, which would bring the total number of imports down to six.

The power sector has been reluctant to take its full allocation of LNG due to a decline in electricity demand. The main factors contributing to this decline are rising electricity tariffs and a growing shift towards solar energy. Power distribution companies have reported that approximately 7,000 MW of electricity has been added to the national grid through net metering, while solar energy production is believed to be even higher. Furthermore, industrial closures have been attributed to unaffordable electricity costs, with distribution companies (Discos) informing the power regulator that many industrial units have shut down due to the high prices.

Experts, according to The Express Tribune, have suggest that the government should consider restructuring state-owned gas utilities to reduce operational expenses and lower gas prices. The actual cost of gas ranges between $2 and $6 per million (mmbtu), but consumers are paying significantly higher prices – up to $10 per mmbtu for local gas and $13 per mmbtu for imported LNG.

In response to the reduced demand for LNG, a government committee led by Foreign Minister Ishaq Dar has explored the option of selling contracted LNG to private parties to alleviate the burden on the state. The diversion of LNG to domestic consumers over the years has contributed to the accumulation of circular debt, further straining the economy. Mismanagement in LNG imports has also added financial pressure on local oil and gas exploration companies.

The PM has taken notice of the issue, as consumers are being forced to purchase expensive imported LNG instead of cheaper indigenous gas. The reduction in local gas supplies has now exceeded 200 million cubic feet per day (mmcfd), offering some relief to local oil and gas companies. These companies, which have committed $5 billion in investments, had previously warned the government that their investments were at risk due to the cuts in indigenous gas supplies caused by the prioritization of LNG imports.