Rs100 billion loss: who miscalculated LNG demand?

On February 10, 2016, Pakistan State Oil (PSO) signed with Qatargas a contract to import up to 3.75 million tonnes of LNG per year over 15 years at a price fixed at 13.37 per cent of Brent crude. In February 2021, a supplementary government-to-government agreement for an additional 200 million cubic feet per day of LNG was signed at 10.2 per cent of Brent.

Lo and behold, there’s now a massive surplus of LNG stemming from several LNG cargoes imported from Qatar, for which Pakistan has no immediate use. Yes, there’s a decline in gas-fired power generation. Yes, the massive surplus is forcing domestic producers to curtail gas output. Yes, state-owned buyers are now offloading gas to local users at steep discounts. Yes, the government has already deferred five LNG cargoes from 2025 to 2026 without penalty.

Q: Why is there a Rs100 billion loss? A: The loss results from two key factors: poor forecasting of energy demand and inflexible long-term LNG import contracts. Q: Who is responsible? A: The primary responsibility lies with the Ministry of Energy and state-level planners. Q: Who will bear the cost? A: Ultimately, the burden will fall on Pakistani taxpayers.

The Ministry of Energy misjudged demand and committed Pakistan to inflexible contracts. Nepra failed to align power generation planning with procurement strategy. The Planning Commission did not coordinate long-term energy planning across institutions. Together, these institutional failures created a structural mismatch between supply and demand -- handing Pakistani taxpayers a Rs100 billion loss.

Why are energy procurement decisions made solely by the government? Why isn’t the private sector empowered to participate, compete, and invest? Why does bureaucracy, rather than efficiency, drive multi-billion-rupee decisions? This Rs100 billion loss is definitely a policy failure. Will it be a wake-up call? Without accountability and reform, Pakistan’s energy sector will continue burning through taxpayer money.