Pakistan’s RLNG Imbalance Is a Market Design Failure, Not a Supply Constraint
A professional diagnostic of why rigid LNG/RLNG procurement, weak power-sector offtake, reactive balancing, bundled utility roles and non-causative cost recovery produce simultaneous surplus gas, constrained demand, tariff distortion and circular debt.
RLNG procurement is supply-led and contract-driven.
Long-term LNG obligations and terminal schedules create fixed upstream commitments. Downstream demand confirmation is not consistently treated as a binding entry condition.
Power-sector offtake is structurally volatile.
Dispatch depends on merit order, hydrology, coal, nuclear, solar, system demand, transmission constraints and fuel economics. Forecast demand can therefore diverge from actual lifting.
Demand-side take-or-pay is not aligned with supply-side commitments.
RLNG is imported under hard contractual obligations, but equivalent downstream obligations are weak or incomplete. This shifts non-lifting risk to the gas system.
Regasification can exceed bankable offtake.
Where import capacity and regasified volumes are higher than realised power or industrial demand, the issue is not terminal capability; it is demand discipline and commercial settlement.
Line pack is being used as a balancing buffer.
Line pack is an operational tool for short-term flexibility. Using it repeatedly to absorb structural surplus converts a pipeline into a de facto storage and imbalance buffer.
Swaps, retainage and diversion obscure cost attribution.
Inter-system swaps and retainage may keep the network physically stable, but they weaken traceability of who consumed the molecule and who caused the cost.
Administrative allocation overrides economic allocation.
Priority lists and policy directions can displace price signals, payment discipline, export value, efficiency and recovery quality as allocation criteria.
The RLNG cost stack is not sufficiently ring-fenced.
Commodity cost, terminal and regasification charges, transmission, distribution, RLNG-specific UFG, exchange impact, diversion and under-offtake costs require separate tracking.
System-average UFG penalises low-loss consumers.
High-pressure, metered industrial and third-party users should not bear losses caused by low-pressure retail networks. UFG requires class-wise and pressure-tier benchmarking.
Tariff design transmits volume decline into higher unit cost.
A largely fixed revenue requirement spread over shrinking sales volumes creates a denominator spiral: lower throughput, higher prescribed price, further demand erosion.
Bundled utility roles weaken accountability.
When the same utility transports, distributes, sells, bills, collects, allocates RLNG and absorbs policy costs, the boundary between network cost and commodity cost becomes opaque.
Power-sector decisions create gas-sector financial consequences.
Merit-order dispatch and lower RLNG lifting can reduce power circular debt while increasing gas-sector circular debt unless the non-lifting cost is contractually assigned.
Immediate closure of efficient CPP/CHP demand is system-negative.
High-efficiency, process-integrated and renewable-firming industrial systems should not be penalised for RLNG surplus, power under-offtake, domestic subsidy or system-average UFG.
The recurring pattern confirms structural failure.
Repeated surplus, swaps, line-pack stress, diversion, under-recovery and demand destruction over several years indicate a design issue rather than a one-off operational mismatch.
| Reform area | Required action |
|---|---|
🤝Demand discipline | Introduce back-to-back take-or-pay, firm nominations and no-cargo-without-committed-offtake discipline for RLNG procurement. |
💵Cost causation | Ring-fence RLNG cost stacks with segment-wise actualisation of commodity, terminal, transmission, UFG, diversion and under-offtake costs. |
🔍Transparency | Publish monthly reconciliation of regasification, sector offtake, swaps, retainage, UFG, diversion, line-pack movement and under-recovery. |
🏢Market structure | Functionally and legally unbundle transporter and merchant/sales roles of SNGPL and SSGC, with separate accounts before structural separation. |
🔄Access regime | Operationalise third-party access and open access through declared capacity, standard agreements, balancing rules and non-discriminatory access. |
📈Competition | Enable private LNG imports, shipper-based gas sales, direct E&P sales and competitive procurement for eligible industrial and commercial buyers. |
🏭Industrial protection | Protect certified high-efficiency CHP, process-integrated gas use and renewable-firming captive systems while phasing out inefficient, grid-substitutable generation. |
⚖️Tariff design | Separate neutral transportation tariff from commodity cost; move subsidies to the budget; benchmark UFG by class and pressure tier. |
🧾Legacy debt | Ring-fence and settle legacy circular debt and stranded RLNG costs before unbundling, so new market entities do not inherit old policy losses. |
Conclusion
Pakistan’s RLNG imbalance is the balance-sheet and operational expression of a market-design problem. The system procures supply before firm demand is locked, transports gas through bundled entities, allocates by administrative direction, and recovers costs through pooled tariffs instead of causative settlement. The corrective is a sequenced reform: demand-backed procurement, monthly reconciliation, ring-fenced RLNG pricing, neutral transport, third-party access, private LNG participation, Sui transporter/sales separation, class-wise UFG benchmarking, and protection of efficient industrial CHP and renewable-integrated demand. Reform should not penalise efficient productive demand for costs caused elsewhere in the system.