LNG

Azerbaijan, a supplier of natural gas via the Trans-Adriatic Pipeline to Europe, is expected to confirm a West Asian gas deal involving the supply of one LNG cargo a month to Pakistan after a year of energy cooperation talks between the two nations.

The State Oil Company of the Republic of Azerbaijan, known as SOCAR, is set to confirm the deal to supply LNG on credit to the company called Pakistan LNG Limited and gasoline to Pakistan State Oil Co. during the second half of 2023 under an inter-governmental agreement.

Pakistan has two floating LNG import terminals at Port Qasim, east of Karachi, though has been unable to import sufficient volumes because of the country’s financial woes and political instability.

Pakistan’s Minister of State for Oil, Musadik Masood Malik, first raised the LNG imports issue in a meeting in 2022 involving SOCAR President Rovshan Najaf as well as the Minister of the Investment Council of Pakistan Chaudhry Salik Hussain.

“Discussions were held on the oil and gas sector, especially the trade of oil products, the development of natural gas infrastructure and the supply of LNG to Pakistan,” said a statement,

Affordable LNG

Pakistani Oil Minister Malik said the government was in the process of finalising the LNG supply deal with Azerbaijan.

“The less expensive LNG imports from Azerbaijan would be according to the domestic demand and the available finances,” Malik explained.

The Minister added that the LNG agreement would mandate Azerbaijan to offer one cargo of LNG at the lowest price possible every month.

He added that Pakistan’s deal was “unique” in that it offered the “flexibility of accepting or rejecting the cargo offer” without giving any reason.

Malik added that Pakistan would be offered 12 cargoes by SOCAR over the coming year.

“This accord is an unprecedented opportunity for Pakistan to access affordable LNG from around the world through Azerbaijan’s trading network,” added Malik.

Azerbaijan has no LNG production facilities of its own but has been an LNG market player since 2016 through its SOCAR Trading division, which buys and sells LNG cargoes worldwide as well as other oil and gas products.

The Azeri gas fields also supply large pipeline volumes to European Union nations such as Bulgaria, Greece and Italy as well as to Georgia and Turkey by pipeline.

SOCAR has large-scale domestic oil and gas joint ventures in the prolific Azerbaijani sector of the Caspian Sea with BP of the UK and France’s TotalEnergies, two companies with widespread LNG portfolios and ready access to cargoes.

Long-term ambitions

The Azeri company said it would regard the final LNG deal with Pakistan as a way of “maintaining productive and warm economic relations with a friendly country and partner”.

Analysts noted that Pakistan was also aiming in the longer term for natural gas supply links with another former Soviet Central Asian republic, Turkmenistan.

The Pakistanis have signed an accord on the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline project that the region has been looking at for more than 10 years as opening the way for regional development if the project ever started.

That 1,800-kilometre (1,120 miles) pipeline if built in the still unstable region would carry volumes from Turkmenistan’s huge Galkynysh gas field via Afghanistan and Pakistan to the Indian city of Fazilka.

The route would also take the TAPI pipeline through the Afghan cities of Herat and Kandahar and the Pakistani cities of Quetta and Multan.

Pakistan said it was seeking a third long-term liquefied natural gas supply contract with Qatar possibly involving deferred payments as the Asian nation adjusts to higher global gas prices and record spot cargo values.

Qatar’s Minister of State for Energy Affairs, Saad Sherida Al-Kaabi who is also Chief Executive of QatarEnergy, met two visiting Pakistani minister last week in Doha.

They were Pakistan’s Defence Minister and the Special Envoy of the Prime Minister, Khawaja Muhammad Asif, and Minister of State for Petroleum Musadik Masood Malik.

A statement from the Petroleum Ministry’s office said the discussions in Qatar had covered the enhancement of cooperation in the field of energy between Qatar and Pakistan.

Petroleum Minister Malik said the Pakistani government and Qatar were exploring different “innovative” pricing and supply strategies.

“Deferred payment would be enormously beneficial for Pakistan in the way of cash flows, but that is not the only discussion that we are having,” explained Malik in a statement back in Pakistan.

Existing agreements

Pakistan already has two long-term supply deals with Qatar. The first was signed in 2016 for five cargoes a month, and the second in 2021, under which Pakistan currently gets three monthly shipments.

However, Pakistan’s main cities are suffering power outages as energy procurement is more intermittent because of higher natural gas prices to supply the expanded gas-fired power infrastructure.

Pakistan was looking to secure a new five-year or 10-year LNG supply deal for three monthly cargoes, as well as an additional cargo under an existing deal.

Pakistan imported 8.19 million tonnes of LNG last year, an increase of 10.5 percent on the previous year.

Despite its single-digit volumes, Pakistan is still the sixth-largest LNG importer with plenty of scope for expanding its current two floating facilities at Port Qasim, located to the east of Karachi.

It is behind China, Japan, South Korea, India and Taiwan in the importing ranking and ahead of Thailand.

The biggest supplier last year was Qatar with 5.24MT of deliveries and with other suppliers such as the US, Egypt, Angola and the United Arab Emirates supplying volumes of around 500,000 tonnes each.

The Pakistani government's fuel discussions with Qatar come at a time when it is awaiting the release of funds from the International Monetary Fund to help replenish foreign exchange reserves.