Exclusive-Pakistan cancels Eni LNG cargoes, seeks to renegotiate Qatar supplies

By Ariba Shahid

KARACHI (Reuters) – Pakistan has reached an agreement to cancel 21 cargoes of liquefied natural gas under its long-term contract with Italy’s Eni as part of a plan to reduce excess imports that have flooded its gas network, according to an official document and two sources.

State-owned Pakistan LNG Ltd’s (PLL) document to the Energy Ministry dated October 22 said 11 cargoes scheduled for 2026 and 10 for 2027 would be canceled at the request of gas distributor SNGPL.

Only shipments scheduled for January for both years and those for December 2027 would be retained to meet peak winter demand, according to the document reviewed by Reuters.

Two sources close to the matter in Pakistan said Eni agreed to the move under the contract’s flexibility provisions. LNG is in high demand globally and suppliers typically earn more selling cargoes on the spot market than under long-term contracts.

Eni declined to comment. PLL, SNGPL and Pakistan’s oil ministry did not respond to requests for comment.

TALK TO RENEGOTIATE QATAR SUPPLIES

PLL’s decision marks one of the most significant steps Pakistan has taken to curb its LNG purchases, as increasing renewable energy production and falling industrial demand leave it with a surplus of imported gas.

Eni signed a long-term LNG supply agreement with PLL in 2017, committing to deliver one cargo per month until 2032, with the option to divert shipments to other destinations.

The first source, and a third, said Pakistan was also in talks with Qatar over gas supplies from the Gulf state, with options including postponing some cargoes or reselling them under existing contract terms. Last week, a technical team visited Karachi to plan the shipments. Talks are ongoing and no decisions have been made, the first and third sources said.

QatarEnergy did not immediately respond to a request for comment.

TOO MUCH GAS, TOO LITTLE DEMAND

Pakistan’s long-term LNG supply contracts with Qatar and Eni together cover around 120 cargoes per year, with an average of nine per month coming from two Qatari contracts and one from Eni.

But Pakistan’s LNG imports have fallen sharply this year as demand from power producers has fallen amid rising solar and hydropower production.

Declining gas consumption by power plants and industrial units producing their own electricity added to the surplus, leaving the system significantly in surplus for the first time in years.

The glut has forced Pakistan to sell gas at deep discounts, cut local production and consider offshore storage or resale of excess cargoes, according to government presentations reviewed by Reuters.