The federal government has proposed reserving 10% of Pakistan’s locally produced liquefied petroleum gas (LPG) for remote and hard-to-reach areas to ensure uninterrupted fuel supplies.
Under the proposed reforms, exploration and production companies, refineries and other domestic LPG producers will allocate 10% of their production to state-owned marketing companies at producer prices.
The allocation will primarily support Northern Areas, Gilgit-Baltistan and other remote and hilly regions where households depend on LPG cylinders and existing air-mix plants.
The remaining 90% of locally produced LPG will be sold through transparent monthly auctions to bottlers prequalified by the Oil and Gas Regulatory Authority (OGRA). The auction floor price will be set 5% below Pakistan State Oil’s (PSO) import-parity price.
Prequalification will consider companies’ investment in storage and infrastructure, cylinder availability, geographical coverage and operational capacity. The proposed framework will also include safeguards against cartelisation.
A special provision allows PARCO to allocate 75% of its auctionable share to its subsidiary, PARCO Pearl Gas Limited (PPGL), while the remaining 25% will be offered through monthly auctions.
LPG Demand Expected to Increase
According to the government summary, Pakistan’s LPG market currently stands at around 2.4 million metric tons annually and has expanded at an average annual rate of 7.5% over the last six years.
Demand is projected to grow by 8% to 8.5% annually as households increasingly depend on LPG amid declining domestic natural gas production and restrictions on expanding the piped gas network.
More than 10 million households are connected to the piped natural gas network, while over 25 million households, particularly in remote areas, rely on alternative fuels, including LPG.
A KPMG analysis cited in the government summary projects LPG demand to increase from 2.4 million tons in FY2025-26 to 4.16 million tons by FY2032-33.
Meanwhile, domestic production is expected to rise from 0.96 million tons to 1.35 million tons, leaving imports to cover the growing supply gap.
LPG imports are projected to increase from 1.4 million tons to 2.8 million tons by 2033.
The government estimates that approximately 71% of current LPG supplies are imported, highlighting Pakistan’s dependence on international markets to meet domestic demand.
