LNG

Royal Vopak of the Netherlands has reached a positive final investment decision with Canada’s AltaGas to proceed with a large-scale energy and bulk liquids terminal at Ridley Island in the Canadian Pacific province of British Columbia.

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.

QatarEnergy President and Chief Executive Saad Sherida Al-Kaabi, told the Vancouver LNG2023 conference in Canada that as one of the largest LNG exporter, the Arab Gulf nation noted there were already concerns about energy security and affordability in the European Union even before the 2022 Russian invasion of Ukraine.

Indian liquefied natural gas imports dropped by 24 percent in May at prices lower than a year ago to reverse April’s brief rebound as domestic gas production was also flat while the start of the monsoon season in June has coincided with higher cargo prices.

Pakistan has formally moved out of the economic vulnerability phase and will start making payments to multilateral lenders on time while seeking bilateral debt restructuring that will help improve the timing of liquefied natural gas deliveries while the Asian nation has also just started importing cut-price Russian oil.

European and Asian liquefied natural gas prices and wholesale values fell again as European Union gas storage continued its early build while Germany and China were receiving more cargoes.

The Japan-Korea Marker price for spot LNG cargoes for Japan, China and South Korea moved back to the trading limelight for the February 2023 trading window as the European Union benchmark gas price crashed from record highs amid less severe Continental weather, though withdrawals from EU gas storage increased.

The benchmark European Union natural gas futures price remained more than $9 per million British thermal units above Asian spot LNG cargo values, even as prices dropped, while cargo liftings declined amid various outages and ship charter rates jumped.

The Pakistan Federal Cabinet has approved changes in the Liquefied Natural Gas Policy, 2011, ahead of Prime Minister Shehbaz Sharif’s visit to Qatar.

Over the weekend, Pakistan’s Cabinet’s Economic Co-ordination Committee (ECC) approved a proposal not to exclude new LNG terminals and associated facilities from applying for third party access (TPA).

The Ministry of Energy (Petroleum Division) had submitted a summary of amendments in LNG Policy, 2011 for an exemption from the mandatory TPA for new LNG Terminals.

However, according to local television broadcasts, it was decided to forego this condition regarding TPAs for new LNG terminals, which would help fulfil the rising demand of LNG in the country, the Cabinet reportedly said. 

It said that the decision would encourage foreign and private investment in the LNG sector and there would also be chances of more investment in the LNG terminals.

The difference between gas supply and demand causes gas load shedding, which affects commercial activities across the country, it was claimed 

Under the circumstances and to diversify the LNG import infrastructure, there was a need to support and encourage foreign/private investment in new Pakistani LNG terminals at their own expense and risk to meet the growing demand of RLNG.

Energy strapped Pakistan has asked for bids for 72 LNG cargoes over a six-year period.