Qatar strikes deal to supply gas to other destinations due to thin demand in Pakistan
Customs duty on cotton was increased many times in an apparent attempt to appease the disgruntled parliamentarians. PHOTO: FILE
ISLAMABAD:
The government has claimed that it has been able to save over Rs1,000 billion by diverting 24 liquefied natural gas (LNG) cargoes from Qatar in 2026. Under its reform agenda, the government is also reviewing multiple options to clear a huge circular debt of Rs2.6 trillion in the gas sector.
Pakistan and Qatar have struck a deal to divert and ship LNG cargoes to other destinations next year because of low domestic demand. “By diverting 24 cargoes, the government will save more than Rs1,000 billion as no subsidy will be required for lifeline gas consumers,” an official said.
According to officials, the government’s policy reforms and administrative actions have not only attracted investment from state-owned oil and gas companies in Turkiye and Azerbaijan, but have also been instrumental in settling outstanding invoices and halting the growth of circular debt within the gas sector.
Pakistan has been curtailing indigenous gas supply due to LNG imports. Additionally, the government is working on different initiatives under its reform agenda to bring investment to the energy sector.
Sui Northern Gas Pipelines Limited (SNGPL) and Pakistan State Oil (PSO) had initially estimated that 177 cargoes would be surplus during the period July 2025 to December 2031, translating into 24 cargoes per year.
Sources told The Express Tribune that Pakistan and Qatar had reached a deal to divert 24 LNG cargoes in 2026 due to thin demand in Pakistan under a net proceeds differential formula. As part of this mechanism, Pakistan will have to bear loss if Qatar sells the LNG meant for Pakistan in the open market below contract price.
This differential will eventually be passed on to LNG consumers. The Oil and Gas Regulatory Authority (Ogra) will allow the public gas utilities to recover the net differential.
Earlier, the Economic Coordination Committee (ECC) gave the green light to PSO for clinching a deal on diversion of 24 LNG cargoes in 2026. Pakistan and Qatar had signed two LNG supply agreements, under which Pakistan was receiving nine cargoes per month. Apart from that, Italy’s Eni was supplying one cargo in a month. The LNG diversion is expected to bail out local exploration companies including Oil and Gas Development Company (OGDC). OGDC has received Rs82 billion due to the settlement of invoices.
Sources said that the OGDC settlement came in the backdrop of policy and administrative interventions by the government. The Petroleum Division took measures to ensure timely payments by the Sui company, effectively curbing the accumulation of circular debt. OGDC is also receiving returns on Term Finance Certificates as per the schedule. The principal amount has already been fully received. With the government’s efforts, international confidence has been restored, and agreements with Turkiye have been successfully concluded recently.
A technical team from Azerbaijan’s SOCAR will also arrive this month for week-long meetings at OGDC to evaluate opportunities in the upstream petroleum sector. Technical sessions will cover the potential for onshore and offshore exploration licences, leases and international collaboration.
In addition, the development of the Reko Diq copper and gold mining project is proceeding as per schedule. Financing has been secured in accordance with the project development concept, ie, 50% equity and 50% funding.
The financing for Reko Diq will be the highest ever for any mining project. International financial institutions have reposed full confidence in the project and the ability of state-owned enterprises as project shareholders. The project consists of two phases with room for significant expansion in due course. Pakistan will receive $1.5-2 billion annually once it is fully operational. An elaborate tight gas monetisation programme is already underway. OGDC is fast-tracking a shale pilot project while Schlumberger and Baker Hughes have been engaged for technical and technological assistance.
The pilot programme has been designed to establish technical and commercial viability of shale reserves in Pakistan. Horizontal fracking will commence in early 2026. Recently, Turkish companies have shown interest in joint ventures and technical collaborations. According to an agreement, Turkish Petroleum will spearhead seismic and drilling operations in Indus Block-C in partnership with OGDC, Pakistan Petroleum and Mari Energies.
