Gas force majeure hits Punjab

Pakistan's Sui Northern Gas Pipelines Ltd (SNGPL) has declared force majeure, suspending the supply of regasified liquefied natural gas (RLNG) for three weeks. The company cited renewed tensions around the Strait of Hormuz as the reason for this disruption, which is expected to significantly hamper power generation in Punjab.

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the event of force majeure notified due to ongoing war in the Gulf region remains in effect and continues to prevent the performance of its supplier’s obligations under their LNG Sale and Purchase Agreements (SPAs).

The force majeure notice, sent to four RLNG-based power plants in Punjab, indicates that the ongoing conflict in the Gulf region prevents the fulfillment of contractual obligations. Pakistan State Oil (PSO), the supplier, informed SNGPL that Qatar Energy, the source of the LNG, is facing operational constraints due to security threats. While some transits through the Strait of Hormuz have resumed, safe passage remains intermittent.

This suspension of RLNG supply, effective from July 14 to August 3, and potentially affecting subsequent cargoes, could lead to increased loadshedding across the country. Officials suggest that while rationing existing imported cargoes might offer some relief, the government may need to increase its reliance on the more expensive spot market for fuel.

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the regional military conflict remains unresolved and ensuing threats to security remain elevated.

SNGPL's ability to meet its obligations under the Gas Supply Agreement (GSA) is materially and adversely affected by these circumstances, which are beyond its reasonable control. Qatar Energy has indicated that it is prevented from delivering scheduled cargoes and will provide an updated Annual Development Plan for the remainder of the contract year. SNGPL is monitoring the situation and coordinating with PSO to manage the impact on RLNG supplies and related operational effects.

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Accordingly, the event of force majeure previously notified, continues under Article 13 of the GSA and SNGPL is relieved from its performance obligations to the extent and for the duration that such force majeure Event or its effects continue in accordance with” the GSA.