Pakistan, Qatar close to revised LNG deal

Sources in PSO Pakistan requested that Qatar. Energy lower its LNG prices from 13.37% to 10.20% of Brent under the pricing formula for their first LNG contract. While Qatar.

Energy declined that specific request, the company ultimately agreed to a reduced price of 11.36% applicable to both LNG contracts. Pakistan requested Qatar to keep the gas price unchanged at 10.20% for all future supplies under the second LNG contract.

However, Qatar. Energy has demanded an increase to 11.98%. In its final offer, Qatar asked Pakistan to settle the LNG prices at 11.96% for both LNG contracts.

The official sources said that Qatar LNG prices were final and Pakistan is to take a decision. This offer is for 66 cargoes a year, against the existing deal for 108 LNG cargoes 2027–31. As many as 210 LNG cargoes have been deferred over 4 years after 2031.

The sources in the PSO said that the company is seeking government nod to seal a deal till November 3. Pakistan-designated entity Pakistan State Oil (PSO) and Qatargas have serviced LNG supply contract review notices.

Both Sale Purchase Agreements (SPAs) between PSO and Qatar. Energy were concluded under Government-to-Government arrangement. Under these agreements, PSO has to receive 6.75 MTPA LNG (108 cargoes) during each contract year.

SPAs between PSO and Qatar. Energy are on a take-or-pay basis and both agreements are valid until 2031. Both contracts have minimal flexibility for diversion, all surplus cargoes if sold abroad lead to profit accruing to Qatar.

Energy while all loss is on account of PSO.Due to declining power-sector demand, LNG supply in the Sui's system became surplus. In order to address this surplus, the government in 2023 authorized PSO to negotiate with Qatar.

Energy for a reduction of two LNG cargoes per month. As a result, 24 cargoes were reduced under the Net Proceeds Differential (NPD) arrangement in the CY 2026 annual delivery plan. The Attorney General Office provided contractual guidance on matter.

SPAs, price review negotiation has been triggered for which both the Parties are required to negotiate the price for the remaining period under the respective SPAs. Qatar. Energy served a price review notice to PSO dated 7th March 2026 in respect of SPA-II and PSO served a price review notice to Qatar.

Energy dated 19th March 2026 in respect of SPA-I.Under Clause 15.2 of SPA-I, either Party may issue a Price Review Notice to renegotiate the Contract Price, but not before the 10th anniversary of the Start Date, i.e., 1st March 2026.

Once notice is issued, the Parties are required to meet in good faith to discuss and agree on any Price Adjustment. If agreed, the revised Contract Price will apply from the Review Date until the end of the Supply Period, with neither Party entitled to issue a further Price Review Notice.

If no agreement is reached within six (6) months of the notice, either Party may terminate the agreement, with termination taking effect at the end of the Contract Year in which notice is served.

This effectively gives Pakistan three options: negotiate a revised price, accept the existing price if negotiations fail, or terminate the Agreement (though termination carries supply continuity risk,) while attempting to seek greater flexibility in the contractual framework.

Under Clause 15.2 of SPA-II, either Party may issue a Price Review Notice between 7 and 31 March 2026 in writing and no later than 31 March 2026, setting out the reasons why the Contract Price no longer reflects market conditions.

At the Review Date, the Parties are required to review and, if necessary, adjust the pricing formula so that the Contract Price falls within the range of prices under Comparable Contracts, regardless of source of supply, with price review benchmarked against comparable LNG contracts and reputable industry publications.