ISLAMABAD: In a significant policy shift, the government has decided it will no longer absorb financial losses arising from the diversion of Liquefied Natural Gas (LNG) cargoes under the Net Proceed Differential (NPD) clause. Instead, any losses incurred will now be passed on to Regasified Liquefied Natural Gas (RLNG) consumers, officials confirmed to The News.
Read More: LNG surplus forces govt to rethink 15-year gas connection ban
A senior Petroleum Division official revealed that Pakistan is currently negotiating with Qatar to divert between 24 and 29 LNG cargoes to the global market in 2026 under the NPD provision. Qatar is expected to confirm the number of diversions by November 30, though officials believe the lower figure is more likely.
Under the existing NPD clause, if a diverted cargo fetches a higher price internationally than Pakistan’s contract rate, Qatar retains all profits. However, if the cargo sells at a lower price, Pakistan State Oil (PSO) must cover the loss. This arrangement has prompted Islamabad to decide that neither the government nor PSO will bear any downside risk moving forward.
Cost of low-priced diverted cargoes to be borne by power plants, industries and new domestic RLNG users
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The financial burden will now be transferred to RLNG consumers, including four RLNG-based power plants, export-oriented industries and new domestic consumers receiving RLNG-linked connections. Officials warned that this shift will likely push RLNG prices up across major sectors, increasing electricity generation costs and raising fuel expenses for industries and households relying on RLNG.
Meanwhile, the Oil and Gas Regulatory Authority (Ogra), in its latest pricing determination, projected a positive impact of Rs48 billion due to potential LNG diversions. However, concerns have emerged over whether Ogra accounted for the risk of diverted cargoes selling below the term contract price.
Govt to Recover Losses From LNG Cargo Diversions Directly From RLNG Consumers.
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Despite the debate, the government estimates potential foreign exchange savings of $339.6 million if Qatar approves the diversions, given the term cargo value of $28.3 million per shipment.
Read More: Pakistan asks Qatar to divert 24 LNG cargoes
Sources noted that better RLNG management earlier this year could have prevented complications. In October 2024, multiple inter-agency meetings recommended diverting 37 cargoes due to higher spot prices, but PSO did not utilise its contractual flexibility, leading to operational challenges.