Pakistan’s Negotiations with Qatar on LNG Cargo Deferral and Its Effect on Energy Supply Chains

Pakistan’s LNG Supply Challenges and Qatar’s Proposal

Pakistan is currently facing a growing gas supply-demand imbalance that is leading to discussions with Qatar regarding the deferral of LNG cargo deliveries beyond 2030. Qatar has invited Pakistan to submit a formal proposal to either postpone some LNG cargoes past that year or to let Doha sell certain term cargoes on the international market under the Net Proceeds Differential (NPD) clause. This dialogue comes amid a reduction in Pakistan’s domestic gas consumption, particularly impacting contractual gas imports from Qatar.

Understanding the Context: The Decline in Gas Demand

Domestic gas usage has sharply declined, forcing Pakistan LNG Limited (PLL) to divert LNG cargoes originally purchased under long-term contracts, including cargoes purchased from ENI, an Italian energy company. Since early 2025, PLL has been redirecting approximately one term cargo per month to the international spot market, a strategy that will continue through the end of the year. This practice highlights oversupply concerns and underscores the urgent need for contractual rebalancing between Pakistan and Qatar.

The Cargo Deferral Figures and Financial Stakes

Initially, Pakistan aimed to defer 177 LNG cargoes valued at $5.6 billion beyond 2030, including those from ENI. However, the latest stance excludes ENI cargoes since these fall outside Qatar’s direct supply agreements. Instead, Pakistan plans to consume 80 cargoes annually from Qatar’s contracted 108, leaving a surplus of 28 cargoes per year—totaling 140 surplus cargoes over the next five years.

Value of Surplus LNG Cargoes

Negotiations and Contractual Frameworks

A delegation led by Pakistan’s Federal Minister for Petroleum and Natural Resources visited Doha in August to discuss the ongoing gas supply challenges and seek potential relief options within the framework of existing agreements. While emphasizing the importance of maintaining two long-term LNG contracts with Qatar, Pakistani officials stress that deferring 140 cargoes valued at over $4 billion is outside current contract terms and requires mutual consent.

Key Terms of the LNG Agreements

Pakistan imports nine LNG cargoes monthly from Qatar under two main agreements:

• A 15-year contract for five cargoes, priced at 13.37% of Brent crude oil prices.
• A 10-year contract for four cargoes, at 10.2% of Brent.

Both contracts operate under a strict Take-or-Pay model, obligating Pakistan to pay regardless of actual gas usage. Diversion of cargoes is limited and subject to Qatar’s NPD clause, where profits from resale belong to Qatar and losses fall on Pakistan if sale prices are below contract rates.

Comparing ENI and Qatar Agreements

In contrast, Pakistan’s LNG deal with ENI contains a profit-and-loss sharing clause for diverted cargoes sold internationally, providing more flexibility. The Qatar contract favors reducing risk for the supplier, leaving Pakistan to absorb financial losses if diverted cargoes must be sold at lower prices.

Impact on Gas Infrastructure and Energy Demand

The reduced consumption has caused operational issues along Pakistan’s gas infrastructure, notably excessive line pack pressure in the principal RLNG pipeline that could trigger system failures. In response, local gas fields that supply up to 400 mmcfd have been shut down to mitigate pressure. Unfortunately, shutting wells risks permanent damage and affects LPG and crude production—as evidenced by refinery operational challenges.

Power and Export Sector Gas Usage

The power sector currently consumes only about 510 mmcfd of RLNG, down from its contractual 800 mmcfd, and the export industry’s RLNG usage has dropped dramatically from 350 to 100 mmcfd. These declines are primarily driven by high RLNG prices (Rs3500 per MMBtu) and additional levies, making gas an expensive input.

The Broader Economic and Energy Implications

Despite LNG cargo diversions, Pakistan still faces an oversupply of 24 cargoes per year. Managing this excess has cost the government billions, with RLNG diversions to domestic sectors valued at Rs242 billion in fiscal 2024–25 alone. The original design of four RLNG-based power plants in Punjab emphasized continuous operation under a 66% take-or-pay obligation for cost-efficiency. However, these plants now follow the Economic Merit Order, running only when cost-effective, shifting the financial burden onto the petroleum and LNG import entities.

Challenges for State-Owned Importers

Pakistan State Oil (PSO), responsible for LNG imports, remains committed to purchasing nine cargoes monthly, due to contractual obligations irrespective of falling demand. This creates strain on public finances and infrastructure while forcing Islamabad to submit a viable deferment proposal to Qatar. The wait now is on Qatar’s response, contingent on Pakistan’s formal request.

Logistics and Supply Chain Considerations

The LNG cargo deferral and diversion plans introduce significant logistics challenges. LNG shipments require careful scheduling, storage, and regasification infrastructure coordination. Oversupply issues affect procurement and delivery scheduling, impacting the entire energy distribution chain. Efficient transport and storage logistics become critical to avoid bottlenecks and potential infrastructure risks, such as line pack pressure violations.

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Key Points and the Value of First-Hand Experience

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Outlook for Logistics Amid LNG Contract Talks

While the LNG deferment issue mainly concerns the energy and contractual domains, its ripple effects on logistics and freight forwarding are non-negligible. Handling cargo surpluses, rescheduling deliveries, and managing storage capacity will test Pakistan’s transport and logistics networks in the coming years. Though this issue may not drastically alter global logistics trends, regional transport systems, including ports and pipeline infrastructure, will face operational adjustments.

GetTransport.com remains committed to monitoring such developments and supporting clients worldwide with freight solutions that keep pace with evolving market needs. Start planning your next delivery and secure your cargo with GetTransport.com.

الخاتمة

Pakistan’s dialogue with Qatar on deferring LNG cargo deliveries beyond 2030 highlights the complex interplay of supply contracts, domestic demand fluctuations, and the logistics required to handle fluctuating gas supplies. Faced with oversupply, infrastructure pressures, and financial constraints, Pakistan must negotiate carefully to ensure sustainable energy sourcing that aligns with actual use. For logistics, this means adapting freight, shipment, and forwarding arrangements to handle cargo surpluses and possible rescheduling. Platforms like GetTransport.com prove invaluable in these scenarios, offering reliable, affordable, and efficient solutions for cargo transport, whether bulky, international, or specialized freight. Such services simplify complex logistics, allowing businesses and governments to focus on strategic energy management without fretting over transportation hurdles.