Pakistan LNG demand may rise in FY 2025-26 on economic growth prospects

Pakistan's LNG demand could remain steady or strengthen slightly in the 2025-26 fiscal year (July-June) due to expectations of economic growth driven by lower interest rates, a stable currency and government efforts to secure loans from the International Monetary Fund to boost foreign exchange reserves, according to analysts surveyed by Platts, part of S&P Global Energy, as of July 7.

The government expects the economy to grow by 4.2% in the fiscal year beginning July 1, 2025, up from 2.7% growth in the year ended June 30, 2025. Additionally, industrial activity is projected to rebound, potentially increasing by 3.5% following a 1.5% contraction in the previous fiscal year, according to government data collected as of July 3.

Ali Nawaz, chief executive officer at Chase Securities, a Karachi-based equities trading firm, expects Pakistan's LNG demand to remain stable in FY 2025-26, supported by improved macroeconomic stability and a slight uptick in industrial activity.

"After facing tight external financing conditions and constrained foreign exchange reserves in recent years, the anticipated continuation of the IMF program and a more stable currency environment could allow the government to resume spot LNG purchases to supplement long-term contracts," Ali said.

Pakistan's LNG consumption was 914 MMcf/d in the year ended June 30, 2025, the lowest in five years, and imports fell for the fifth straight year, according to data from the Ministry of Energy.

In fiscal year 2024, LNG imports stood at 923 MMcf/d; in 2023, they were 1,004 MMcf/d; in 2022, 1,035 MMcf/d; and in the year ended June 30, 2021, imports were around 1,106 MMcf/d.

Analysts expect the country's total natural gas demand to remain within the 3,500-4,000 MMcf/d range in FY 2025-26, with LNG comprising 1,000-1,200 MMcf/d, depending on both availability and pricing. However, as domestic gas production continues to decline due to depleting reserves, reliance on LNG imports is anticipated to grow unless substantial new discoveries are made or pricing reforms are implemented.

Industrial demand

Ali said industrial gas demand, particularly from export-oriented sectors such as textiles and fertilizers, could experience a moderate recovery, provided that power and gas prices remain competitive and energy availability improves.

The government is also expected to prioritize gas allocation to power generation during the summer months to reduce reliance on imported furnace oil, which could further drive up LNG imports, he said.

"Keeping in view that Pakistan is under contract with Qatar for a long-term program, Pakistan will continue to import regasified LNG," said Muhammad Iqbal Jawaid, assistant vice president of research at Arif Habib Ltd. "Furthermore, the demand from industries will be lower due to costly gas tariffs for captive power plants and the removal of subsidies."

Pakistan has hiked prices for natural gas supplied to captive gas-fired power generation units installed at export companies to help reduce the subsidy burden of its state energy companies.

As a result, the unutilized regasified LNG is being redirected to domestic and other consumers. The inflow of regasified LNG is projected to be about 900-950 MMcf/d in the upcoming fiscal year, Iqbal said. Regasified LNG cargo imports are expected to total around 110-115 shipments.

Upcoming negotiations

In the year ended June 30, 2025, Pakistan imported 116 cargoes of LNG, compared with 121 cargoes in the previous year, according to government data.

"Pakistan will be able to renegotiate regasified LNG terms and gas supply with Qatar in 2026 for FY 2027 and onward, which will lower regasified LNG rates, the benefit of which will be passed on to local consumers," said Muhammad Waqas Ghani, head of research at JS Global Securities. Moreover, Pakistan is also engaging with Azerbaijan to procure regasified LNG at cheaper rates.

"As per our understanding, the government could also reduce regasified LNG imports in order to promote local natural gas production," he said.

However, Syed Fawad Bashir, head of research at KTrade Securities Ltd., believes that LNG demand, in particular, will be lower despite expectations of increased industrial activity, as many industries, such as cement and textiles, have shifted toward renewable energy to reduce both their carbon footprint and costs.

Pakistan has also deferred five LNG cargoes under its agreement with the Qatari government for 2025, which will now be shipped in 2026.

The government signed two agreements with Qatar for periods of 15 years and 10 years, at price slopes of 13.37% and 10.2% of Brent, respectively.

Separately, in January 2025, Sui Northern Gas, Pakistan's largest gas distributor with over 7.5 million consumers, requested state-run importer Pakistan LNG Ltd. to defer 11 cargoes scheduled to arrive in 2025. So far, Pakistan LNG has deferred five cargoes, including the parcel set to be shipped in August.

Pakistan LNG signed a 15-year agreement with ENI in 2017. Under this agreement, cargoes were purchased at a price slope of 11.624% of Brent for the first two years, 11.95% of Brent for the third and fourth years, and 12.14% of Brent for the remaining period until 2032.

Bearish outlook

Abdul Azeem, head of research at Al-Habib Capital, said that the government could be negotiating to defer more LNG cargoes.

Total gas consumption, which averaged 3,143 MMcf/d in the first nine months of FY 2024-25, may remain stagnant or decline in FY 2025-26, according to Azeem. The shift toward solar power, reduced industrial activity and prioritization of expensive LNG over indigenous gas have contributed to a structural imbalance in demand that is unlikely to improve in the short term.

Azeem expects industrial demand for LNG to remain weak in FY 2026-27, as high gas and electricity prices have already forced many industrial units to scale down or shut operations.

"With energy affordability and competitiveness still major concerns, a significant pickup in industrial LNG consumption is not anticipated," he said.

Government data showed that electricity production from regasified LNG-fired plants declined 6% to 20,015 GWh from July to May in FY 2024-25.