- Performance of E&Ps affected by over import of expensive LNG
According to the data released by PPIS for June 2025, crude oil production for the full year amounted to 62,400 bpd, reflecting a decline of 12%YoY. Natural gas data showed production declining to 2.9 bcfd, down 8%YoY. Both oil and gas production have reached their lowest levels in over 20 years, primarily due to: 1) curtailment of production due to congestion in gas transmission network, 2) natural depletion in aging fields, and 3) constrained cash flow position.
Company-wise oil production declined OGDC (7%YoY), PPL (12%YoY), and POL (6%YoY) during FY25. Gas production also dropped OGDC (7%YoY), PPL (12%YoY), and MARI (2%YoY).
According to AKD Securities, RLNG priority forced domestic production curtailment. The line-pack pressure forced E&P companies to curtail indigenous production to pave way for the more expensive RLNG being injected into the system.
Notably, PSO has in place twin long-term take or pay contracts to supply 3.75 and 3.0 mtpa of RLNG over 15 and 10 years (with the last expiry in 2031). The company deferred 5 cargos to CY26 (originally planned for CY25) by exercising the ‘Annual downward flexibility’ option in the contract, which has modestly eased excess RLNG pressure during periods of low demand. Notably, 118 cargoes of 915 mmcfd (up 5%YoY) of RLNG were delivered during FY25.
Moving forward, the brokerage house expects a rebound in domestic production due to: 1) renegotiation of RLNG contract in 2026, 2) deferral of cargoes, and 3) increase in demand on the back of higher economic growth.
Domestic E&P firms have scaled up capital expenditure into exploration and production activities, with notable increases in both drilling and G&G pursuits.
Notably, industry participants have struck 21 discoveries during FY25, up 40% and 91% compared to 15 and 11 discoveries during FY24 and FY23, respectively.
The aforementioned discoveries are anticipated to yield incremental 2,900 bpd of oil and 253 mmcfd of gas as per initial flow rates.
Finally, capex in E&P activities by the listed players has surged as well, estimated at US$362 million during 9MFY25, up 51% and 49% from US$240 million and US$243 million in 9MFY24 and 9MFY23. However, it was still paltry as compared to average of more than US$500 million between FY15-20.
Recent bouts of gas price rationalization by the authorities, raising consumer gas prices by 3x since FY23 has enabled local E&P companies to pursue long-delayed development strategies of their existing resources, while also tapping into aggressive plays to unlock new finds.
Notably, cash receipts for OGDC and PPL have averaged at 105% and 93% during 9MFY25 as against an average of 75 % and 64% between FY19-24. The brokerage house anticipate this trend to sustain near 100% moving forward, with potential recoveries of past-accumulated stock post-FY27.
LNG supply glut
Pakistan is exploring ways to sell excess liquefied natural gas (LNG) cargoes amid a gas supply glut that could cost domestic producers US$378 million in annual losses, reports Reuters.
The country has at least three LNG cargoes in excess that it imported from top supplier Qatar and has no immediate use for, and is currently selling natural gas at steep discounts to local users.
Power generation from gas-fired power plants, which has historically accounted for a lion’s share of LNG use in the country, has declined for three straight years ended 2024, with cheaper solar power use dramatically gaining at the expense of gas-fired generation, data from energy think-tank Ember showed.
Pakistan is currently exploring the possibility of transferring LNG cargoes to rented tankers for “offshore storage and onward sale,” state-owned oil and gas producer OGDCL said in a presentation to industry and government.
“Excess LNG in the gas network has resulted in significant production operations impact for local exploration and production companies over last 18 months,” OGDCL said, adding that it had forced curtailment of domestic supply.
The domestic industry could suffer US$378 million in losses over the next 12 months at the current rate of curtailment, according to the presentation dated May 29 reviewed by Reuters.
It is not immediately clear if Pakistan’s long-term LNG import contracts with QatarEnergy allows for a resale of cargoes. One of the government officials said the country was still exploring ways to do it.
Qatar typically has a destination clause in long-term supply contracts with buyers that restrict where the cargoes can be sold.
Pakistan has already deferred five contracted LNG cargoes from Qatar without financial penalty, shifting delivery from 2025 to 2026, as the country grapples with surplus capacity.
Pakistan’s petroleum minister Ali Pervaiz Malik declined to comment on the presentation, but said renegotiating contracts with Qatar was a “complex” process that could take at least a year, and a final decision on initiating it had yet to be made.
“While the existing contract with Qatar allows Pakistan to decline vessels, doing so incurs penalties and other complications,” Malik told Reuters.
The glut has stemmed from several gas-fired power plants, previously operating under must-run contracts, now being sidelined, Malik said.
“It was expected that summer season will create extraordinary demand but the trend indicates the opposite,” OGDCL said in the presentation.