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.

Qatar Petroleum entered into a new long-term supply deal with Pakistan State Oil Company (PSO) for the supply of up to an additional 3 million tonnes per annum of cargoes with prices almost one-third lower than in the previous accord.

Under the 10-year agreement, LNG deliveries to Pakistan's receiving terminals will commence in 2022 and continue until the end of 2031.

The accord was signed in Islamabad between Saad Sherida Al-Kaabi, President and Chief Executive of Qatar Petroleum, and Syed Taha, Head of PSO, in the presence of Pakistani Prime Minister Imran Khan and Saoud bin Abdulrahman Al Thani, Qatar's Ambassador to Pakistan.

PM Khan’s Special Assistant on Petroleum Policy, Nadeem Babar, told a later press conference that the volumes in the new Qatari contract will be about 30 percent less expensive than previously.

“It is the lowest publicly disclosed LNG contract in terms of price in the world,” added Babar.

Babar explained that the deal would help the country save a total of up to US$3 billion over 10 years.

“The previous agreement with Qatar was for 15 years under which the price was fixed for 10 years. The new agreement, however, envisages price reopening after four years,” said Babar.

Qatar and PSO signed a previous agreement in 2016 for 3.75 MTPA of LNG and the new deal raises the total of long-term LNG volumes to 6.75 MTPA.

Babar added that under the new agreement, Pakistan would receive two LNG shipments on average per month and after a period of three years, the number of cargoes would increase to four.

“We are delighted to enter into this new long-term agreement with Pakistan State Oil Company and to continue our contributions towards meeting Pakistan's increasing energy demand,” stated the Qatar Petroleum CEO.

“This agreement further extends Qatar's long-standing LNG supply relationship with Pakistan and highlights our commitment to meeting Pakistan's LNG requirements,” he added.

“We are confident that the exceptional reliability of our LNG supplies will provide PSO with the required flexibility and supply security to fuel Pakistan's impressive growth,” said Al-Kaabi.

Pakistan currently has two operational floating LNG receiving terminals, the Engro LNG facility and the Pakistan GasPort terminal.

Both use floating storage and regasification units (FSRUs) and are located at Port Qasim, east of the city of Karachi.

In further comments, Al-Kaabi noted that Pakistan had a well-established gas market and distribution system and was strategically important for Qatar.

“We are encouraged by Pakistan's exceptional growth and excellent economic potential as well as by the prospects of it being one of the world's fastest growing LNG markets,” added Al-Kaabi.

“I would like to take this opportunity to thank Prime Minister Imran Khan for his support and for his patronage of this special event. I also would like to thank Pakistan's energy officials as well as PSO's management for all their efforts,” stated Al-Kaabi.