Govt to Pass LNG Cargo Losses from State to Consumers

The government has decided to shift the financial burden of potential losses from diverted LNG cargoes onto RLNG consumers. Previously, losses arising under the Net Proceed Differential (NPD) clause were absorbed by the state or Pakistan State Oil (PSO). Now, the cost will be passed directly to consumers, including RLNG-based power plants, export-oriented industries, and new domestic users with RLNG gas connections, reported a national daily. Islamabad is currently negotiating with Qatari authorities to divert between 24 and 29 LNG cargoes in 2026 to the international market under the NPD provision. The NPD clause stipulates that if a diverted cargo sells for more than Pakistan’s contracted price, all profits go to Qatar. If the cargo sells for less, the loss is typically absorbed by PSO. Qatar is expected to confirm the number of cargoes to be diverted by November 30, with officials anticipating the lower end of the range. The Oil and Gas Regulatory Authority (OGRA) recently projected a positive impact of Rs. 48 billion from potential cargo diversions in its latest pricing determination. The regulator stated that domestic consumers would continue to receive local gas at 1,000 rupees per MMBTU until June 30, 2025, rather than the RLNG-linked price of 3,500 rupees per MMBTU. However, there are questions about whether OGRA’s calculations fully accounted for the risk of losses from diverted cargoes. Officials warn that passing NPD-related losses to consumers will likely increase RLNG prices across key sectors. The cost of electricity generation using RLNG will rise, export industries will face higher fuel tariffs, and new domestic consumers seeking RLNG connections will see steeper gas bills. Despite these concerns, the government argues that if Qatar approves the diversion plan, Pakistan could save approximately $339.6 million in foreign exchange, based on the term cargo price of $28.3 million per shipment.