Pakistan to start receiving ‘cheaper’ LNG from Azerbaijan next month

The federal cabinet has approved an agreement to procure liquefied natural gas (LNG) cargoes from Azerbaijan at discounted rates, according to a statement issued by the PM House on Thursday.

Prime Minister Shehbaz Sharif apprised Azerbaijan’s President Ilham Aliyev of the cabinet’s decision during a meeting at the Azeri capital Baku, the statement added.

“This is the second major achievement for Pakistan towards fulfilment of energy needs after recently receiving the shipment of crude oil from Russia,” the communique read.

Under the agreement, Pakistan will receive one LNG cargo on concessional rates per month from next month.

PM Shehbaz has been working on the deal with Azerbaijan for the last six months, the PM Office said.

The two leaders agreed that Azerbaijan would help Pakistan fulfil its energy needs through cooperation in the fields of oil and gas.

The Pakistan State Oil (PSO) and the State Oil Company of the Azerbaijan Republic (SOCAR) will collaborate at the government-to-government level to work out the energy resources, according to the PM Office.

Read more: Pakistan inks deal with Azerbaijan for LNG supply at ‘cheaper price’

It was agreed that Azerbaijan would invest in the alternative energy sector of Pakistan including solar power generation.

Earlier this week, Pakistan issued two tenders seeking spot LNG cargoes for the first time in nearly a year.

Dependent on gas for power generation and running short of foreign exchange to pay for imports, the country has struggled to procure spot cargoes of LNG after global prices spiked last year following Russia’s invasion of Ukraine, leaving it to face widespread power outages.

But Asian spot LNG prices this year have eased from record highs of $70/mmBtu hit in August, and are now trading below $10.

Pakistan LNG, a government subsidiary that procures LNG from the international market, issued a tender seeking six cargoes on a delivered-ex-ship (DES) basis to Port Qasim in Karachi in October and December, according to the tenders posted online.

The delivery windows are Oct 5-6, 20-21 and 31, and Dec 7-8, 13-14 and 24-25. The tender will close on June 20.

Pakistan LNG’s second tender seeks three cargoes, also on DES basis to Port Qasim, for delivery windows of January 3-4, 28-29 and February 23-24. The second tender closes on July 14.

Pakistan LNG last issued a tender seeking 10 spot cargoes in July 2022, but it received no offers.

Pakistan has two long-term supply deals with Qatar, one signed in 2016 for 3.75 million metric tons of LNG a year, and another signed in 2021 for 3 million metric tons a year.

It also has an annual portfolio contract with ENI for 0.75 million metric tons a year.

In 2022, Pakistan’s imports of LNG slowed to 6.93 million metric tons for the year, down from 8.23 million metric tons in 2021, according to data from data analytics group Kpler.