Pakistan's Gas Conundrum: Canceling Contracts, Renegotiating Supplies, and the Surplus Dilemma
In a strategic move to manage its gas network, Pakistan has taken a bold step by canceling 21 liquefied natural gas (LNG) cargoes under its long-term contract with Eni, an Italian energy company. This decision comes as Pakistan aims to curb excess imports and address the surplus gas supply, a situation exacerbated by rising renewable energy generation and reduced industrial demand.
The cancellation involves 11 cargoes planned for 2026 and 10 for 2027, as requested by the gas distributor SNGPL. The document, reviewed by Reuters, highlights a strategic retention of shipments: only the January shipments in both years and the December 2027 shipment will be kept to meet the peak winter demand. This move showcases Pakistan's proactive approach to managing its gas resources.
The flexibility provisions within the contract allowed Eni to agree to this adjustment. With global LNG demand high, suppliers often prioritize spot market sales over long-term contracts, indicating a potential shift in Eni's strategy. However, Eni has not commented on the situation.
This cancellation is part of Pakistan's broader efforts to renegotiate its LNG supplies, particularly from Qatar. Pakistan is exploring options to defer or resell cargoes under existing contract clauses, as it seeks to optimize its gas imports. A technical team's recent visit to Karachi underscores the ongoing nature of these negotiations.
The surplus gas situation in Pakistan is a result of increased renewable energy generation and decreased industrial demand. This has led to a significant oversupply, prompting the government to consider various strategies. These include steep discounts on gas sales, production cuts, and the exploration of offshore storage or reselling excess cargoes.
Eni's last delivery to Pakistan occurred on January 3, according to Kpler data, and the company has agreed not to receive any further cargoes in 2025. This further emphasizes Pakistan's determination to manage its gas supply effectively. The renegotiation efforts with Qatar and Eni are crucial steps in addressing the country's gas surplus and ensuring a sustainable energy future.
