Pakistan to defer eight LNG cargoes from Eni for May-Dec amid weak demand

Pakistan plans to defer eight LNG cargoes from Italy's Eni between May and December amid an anticipated decline in electricity generation, reflecting a slowdown in economic activity, an energy ministry official said March 19.

"The government has been in talks with Eni to defer eight cargoes, one cargo each per month starting from May to December," the official, who requested anonymity, told Platts, part of S&P Global Commodity Insights.

The official added that Eni has already agreed to defer one cargo scheduled to arrive in April.

This follows state-run Pakistan LNG's deferral of two LNG cargoes from the company -- one scheduled for February and the other for the March delivery window.

Pakistan LNG is understood to have signed a 15-year contract with Eni starting in 2017, with an 11.6247% slope of Brent crude for the first and second years, an 11.95% slope for the third and fourth years and a 12.14% slope for the remaining years of supply. The agreement, set to expire in November 2032, is for one cargo per month.

Eni did not comment at the time of writing.

Platts, part of Commodity Insights, assessed JKM -- the benchmark price reflecting LNG delivered to Northeast Asia -- for May at $13.557/MMBtu on March 19, up 35.70 cents/MMBtu, or 2.7%, day over day. Platts assessed the LNG West India Marker for May at $13.225/MMBtu on March 19, at a discount of 33.20 cents/MMBtu to the May JKM assessment.

The need to defer LNG cargoes highlights Pakistan's ongoing challenge in balancing energy imports amid economic constraints, said Rao Aamir Ali, deputy head of research at Arif Habib Ltd., a Karachi-based brokerage company.

Deferring these cargoes would offer immediate fiscal relief to the South Asian nation by avoiding payments during a period of reduced electricity consumption and sluggish industrial production, Ali said.

According to March 17 data from the state-run Pakistan Bureau of Statistics, the country's industrial production contracted by 1.7% during the first seven months of the current fiscal year, which began July 1, 2024.

Electricity production from LNG-fired power plants in February declined significantly to 980 GWh compared with 1,450 GWh in February 2024, data released March 17 by the National Electric Power Regulatory Authority showed.

In the first eight months of the current fiscal year, power generation dropped 3% year over year to 81,739 GWh, according to the data.

In 2022, the Pakistan government signed a 10-year LNG supply agreement with the Qatar government at a price slope of 10.2% of Brent crude.

The government imported LNG worth $2.456 billion in the eight months ended Feb. 28, compared with $2.615 billion during the same period last year, Pakistan Bureau of Statistics data showed.

Pakistan typically imports 120-140 cargoes annually, with the majority (approximately 85-100) coming from long-term contracts with Qatar.

In 2024, Pakistan's LNG imports rose 10% year over year to 8 million mt/year. Except for November, LNG deliveries increased by roughly one cargo per month on a year-over-year basis throughout the year.

Although Commodity Insights projects Pakistan's overall gas consumption to remain stable, the country's LNG demand is forecast to grow to 12.7 million mt/year by the end of this decade and over 30 million mt/year by 2050, as domestic gas production declines, according to a January report.

The report noted that there are some downside risks to the long-term forecast, such as economic instability, the risk of payment default, sluggish infrastructure development and excessive reliance on uncontracted volumes.