ISLAMABAD: In a significant development for Pakistan’s energy sector, the government has managed to secure millions of dollars in relief on LNG terminal capacity payments after tough negotiations with private terminal operators following disruptions in Qatari LNG supplies earlier this year.
Two LNG terminal operators — Engro Elengy Terminal Pakistan Limited (EEPTL) and Pakistan GasPort Limited (PGPCL) — have signed revised agreements offering commercial support to the government as one time facility by reducing some part of the fixed dollar-denominated charges payable under long-term contracts.
The relief comes after missile-related tensions affecting Qatar’s Ras Laffan LNG facilities disrupted LNG movement in the region and led to force majeure declarations on supplies.
Under existing 15-year agreements, Pakistan remains obligated to pay around $538,535 per day — nearly $15 million per month — in capacity and utilisation charges to the two LNG terminals even if LNG cargoes fail to arrive.
Senior officials said that PGPCL agreed to continue commercial support through capacity payments for 34 days — the period during which no LNG supply was available — while EEPTL offered similar support for 39 days during the disruption. The exact financial concession remains confidential, with officials describing it as a one-time arrangement made in the “larger national interest.”
The revised arrangements were finalised after approvals by the boards of Sui Southern Gas Company (SSGC) and Pakistan LNG Limited (PLL), the state entities responsible for the agreements with the two terminals.
Officials familiar with the matter said the government initially examined whether force majeure conditions could legally suspend terminal payments. However, after reviewing the contracts, authorities concluded that the terminal operators were legally entitled to continue receiving payments despite supply disruptions.
Petroleum Minister Ali Pervaiz Malik had publicly questioned the structure of the contracts, arguing that capacity payments should not continue during force majeure events.
Sources said government negotiators subsequently urged the terminal companies to provide relief by taking foreign investors into confidence and finding an “out-of-box” solution to reduce the financial burden on the country.
Meanwhile, in a press statement, PGPCL said it had agreed to extend commercial support to the government of Pakistan in response to recent LNG disruptions in the region.
“PGPC has made this accommodation in the larger national interest in response to the government’s request,” a company spokesman said, adding that the terminal operator remained committed to supporting Pakistan’s energy security framework.
The company noted that since commencing operations in January 2018, its LNG terminal has handled 367 LNG cargoes and maintained high operational efficiency with one of the most competitive tolling tariffs globally.
PGPCL further highlighted that the project represents nearly $500 million in investment across terminal, marine, storage and regasification infrastructure by PGPC, BW Group and Fauji Oil Terminal & Distribution Company Limited.
The terminal uses the floating storage and regasification unit BW Integrity, owned by Norway’s BW Group and Japan’s Mitsui & Co, with storage capacity of 170,000 cubic meters and regasification capability of up to 750 MMcfd.
Energy experts say the episode has once again exposed the vulnerabilities embedded in Pakistan’s long-term energy contracts, where rigid dollar-linked payment obligations continue even during extraordinary geopolitical disruptions.
Critics argue that such agreements place disproportionate financial risk on the public sector, while supporters maintain the guarantees were necessary to attract foreign investment into Pakistan’s LNG infrastructure at a time of severe energy shortages.
Despite the temporary relief, officials acknowledge that the broader structural issue remains unresolved, with Pakistan still locked into long-term contractual liabilities that continue to weigh heavily on public finances and foreign exchange reserves.
