LNG deal: game-changer or financial curse?

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Few decisions have cast as dark and enduring shadows on Pakistan's economy as the power sector — electricity and gas. The 2016 LNG deal stands out as one of the contributors to this adversity.

Shahid Khaqan Abbasi had, as petroleum minister, led the country into this contract with Qatar and touted it as a game-changer for the country's energy crisis. Nearly a decade on, one wonders if it was a game-changer or a fiscal disaster. It now appears as a carelessly designed deal more to serve personal interests of the few than ensuring long-term energy interests of the country.

The LNG deal, say critics, locked Pakistan into a rigid fifteen-year arrangement which is now turning into a financial liability. The country is now awash in imported LNG it cannot afford to consume. As of late July, three fully-loaded Qatari cargoes sat idle, while authorities scramble to offload gas on the international market. What was intended to be a lifeline has become a bleeding artery, draining precious resources from an already battered national exchequer.

By late July, the circular debt linked directly to the LNG deal had exceeded $11 billion. The LNG-fired power plants, constructed then as "symbols of technological progress", have become monuments of economic ruin, according to some experts. Built at over $4 billion, including the grid infrastructure, these plants now produce some of the most expensive electricity in the country.

Instead of powering growth, they are weighing down whatever little economic progress the country is making and contributing to the financial crisis. Technical experts familiar with the business reckon that the LNG strategy may have entailed a staggering $21 billion cost to the nation so far.

Does this merit a debate as to whether Pakistan is now hostage to a single policy blunder — rooted not in misfortune but in apparent self-interest and willful pretense of ignorance?

Why the call for debate? Because even the current minister for petroleum, Ali Pervaiz Malik, recently admitted to the bitter truth. Had the 2015 LNG agreement not been signed, Pakistan might have been spared the scale of financial devastation it endures today — a tragically honest moment of rare clarity indeed, Malik said in an interview early July 2025.

This is not merely a story of bureaucratic error or policy miscalculation but a tragedy authored by a minister who preferred personal over national interest. Why is Mr Abbasi being accused of designing contracts that are now bleeding the national kitty?

The question arises because a professional entrepreneur usually thinks through before venturing into a new business. Did he and his team deliberately ignore the long-term massive financial implications of imported gas and committing the country into long-term fixed cost contracts? And worse still, isn't it a tragedy made possible by the silence and connivance of key bureaucrats of the ministry?

Under the original 2015 contracts, Pakistan committed to importing 3.75 million metric tons of LNG annually from Qatar at 13.37% of the Brent crude oil benchmark. Prior to the signing, the minister and his ministerial minions peddled a narrative across media and policy platforms that the global price of LNG would never fall below 18% of Brent — this projecting the deal as a masterstroke in energy diplomacy.

But not everyone was convinced. Engineer Arshad H Abbasi, an independent energy expert, raised alarm bells early on. He questioned the minister's pricing logic, the contract's length, and the outdated model of pegging LNG to crude oil rather than opting for more modern gas-to-gas indexation. He had warned then that global energy markets were shifting rapidly — shale gas production in the US was accelerating, and Australia was on the cusp of becoming a major LNG exporter. Oversupply was imminent, he warned, and locking Pakistan into a long-term contract would spell disaster.

Ensuing developments and the data associated with it suggest Arshad Abbasi had a point; by 2024, the US had become the world's largest LNG exporter, triggering a global LNG glut. Apparent public pressure forced the minister to negotiate the contract's rate down — from 18% to 13.37% of Brent, yet ministry sources insist he refused to consider short-term contracts or switch to gas-indexed pricing. As the eventual burgeoning costs off fixed-price LNG contracts proved, it was a financial tragedy in the making. Done.

The vested interest eventually turned Engineer Abbasi literally into a persona non grata and managed to muzzle debates in the parliament and the media.

Neither the minister nor the technocrats around him considered looking into the 2014 revised India-Qatar LNG deal, which was far more favourable than between Qatar and Pakistan. Instead they went about silencing and demonising critical voices.

The magnitude of Pakistan's LNG blunder prompted even Daron Acemoglu and James A Robinson — authors of the seminal work Why Nations Fail — to use Pakistan's case (in the revised edition) as a painful example of how self-serving politicians and bureaucracy exploit extractive institutions for personal gains and go on to sabotage national interest.

The 2015 LNG contracts offer a case study in how possible personal ambition of a few can condemn generations into financial servitude. The deal has turned into a festering wound, inflicted not by a foreign enemy but by those entrusted with serving and protecting the public good.