Oil and Gas Development Company (OGDC) has reported a substantial revenue loss of Rs43 billion during the financial year 2024-25 due to curtailment of indigenous gas supply amid rising liquefied natural gas (LNG) imports. The reduction in domestic gas availability comes as power producers have recently become reluctant to take LNG deliveries, disrupting the gas market and impacting OGDC’s revenue streams.
Pakistan imports LNG primarily from Qatar under sale-purchase agreements that feature 100% take-or-pay clauses. However, the Petroleum Division has indicated that recent changes in LNG offtake agreements, attributed to the Power Division, have contributed to a glut of gas in the system. Previously, gas supply agreements with power plants guaranteed a minimum 66% take-or-pay, but this was revised to 50% effective January 1, 2025.
The curtailment has particularly affected the private sector, which has struggled to access gas supplies under third-party arrangements, as public utilities have been hesitant to allocate domestic gas. Although the government approved an increase in gas allocation for third parties from 10% to 35% in January 2025, implementation has remained slow. Despite offers from private entities to take the full supply from exploration companies, domestic gas has been limited due to the preference for LNG usage.
In a corporate briefing on Wednesday, OGDC management stated that the reduction in domestic gas supply due to LNG surplus led to an accumulated loss of Rs43 billion for FY25. Sui Northern Gas Pipelines Limited (SNGPL) reportedly curtailed gas distribution, resulting in an estimated revenue loss of Rs40-43 billion. OGDC noted that, absent this curtailment, hydrocarbon production could have reached 32,709 barrels per day (bpd) of oil and 743 million cubic feet per day (mmcfd) of gas, compared to actual production of 30,919 bpd and 652 mmcfd.
Despite the revenue setback, OGDC declared its highest-ever dividend for FY25, distributing Rs5 per share for the last quarter and Rs15.05 per share for the full year. Management expects upcoming cash flows from Uch as part of the power sector’s circular debt resolution, while a government roadmap for gas-sector circular debt is anticipated within the year.
Looking ahead, OGDC expects hydrocarbon production to begin from the Wali block within two months, with initial flows projected at 25-35 mmcfd of gas and 2,500-3,500 bpd of oil. The Spinwam field, where OGDC holds a 35% stake, is also expected to commence production following resolution of line issues. Additionally, the first phase of Abu Dhabi National Oil Company’s (Adnoc) block has been completed, with production targeted for FY28/29. Capital expenditure for FY26 is projected at Rs50-60 billion, excluding investment in the Reko Diq copper and gold project.
The company remains focused on high-potential regions such as Balochistan and Khyber-Pakhtunkhwa for exploration despite security challenges. Three ongoing development and compression projects—Dakhni, KPD-TAY, and Uch—are expected to collectively add around 737 mmcfd to domestic gas production capacity.
Market analysts at Topline Securities maintain a ‘buy’ recommendation on OGDC, citing a projected FY26/FY27 price-to-earnings ratio of 6.3/6.1x, highlighting the company’s resilience and growth potential despite the recent gas curtailment challenges.
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