In addition to strengthening bilateral ties, Pakistan approved a one-year framework agreement on Wednesday for the import of liquefied natural gas (LNG) from Azerbaijan.
In addition to strengthening bilateral ties, Pakistan approved a one-year framework agreement on Wednesday for the import of liquefied natural gas (LNG) from Azerbaijan.
The pending framework agreement was approved by the cabinet’s Economic Coordination Committee (ECC) hours before the start of the Prime Minister’s two-day visit to the Central Asian Republic.
According to a statement released by the finance ministry, the ECC took into consideration a summary of the Ministry of Energy on the framework agreement to import LNG, between Pakistan LNG Limited (PLL) and State Oil Company of Azerbaijan Republic (SOCAR) Trading.
The energy ministry has approved a framework agreement for one year, allowing Pakistan to import one LNG cargo per month. The price will be determined by Azerbaijan’s offers.
SOCAR will offer LNG cargo 45 days before delivery, with a set validity period for PLL acceptance. The price is in American currency, with a quantity of 3.2 million MMBTU, and payment will be made within 30 days.
The approved framework agreement specifies that the sellers will be responsible for paying the Letter of Credit confirmation fees.
The applicable demurrage rate will also be included in each cargo offer as a fixed amount in US dollars per day and pro rata for each segment of a day.
A confirmation notice will be signed by PLL and SOCAR when PLL accepts an offer for any cargo.
The finance ministry reported that “the ECC directed the Ministry of Energy to determine our need for LNG at least three months in advance on a rolling basis.”
To close the gap between supply and demand, Pakistan State Oil and PLL are importing LNG through long-term supply agreements with Qatar and a European firm.
The initial contract, which was signed in 2015, called for five cargoes per month for 15 years, with an expiration date of 2030. In the second agreement, which was signed in 2021, Qatargas agreed to provide three and four cargoes per month from July 2022 to December 2023 for a period of ten years at a price of 10.2% Brent.
A contract for a 15-year supply of one LNG cargo per month was signed by PLL and Eni in 2017. PLL purchases LNG through spot tenders up to three times per month. Due to high prices, a lack of financing, and poor credit ratings, Pakistan has difficulty acquiring these cargoes.
An Inter-Governmental Agreement (IGA) for energy cooperation was signed between Pakistan and Azerbaijan in February 2017. Contractual details for the LNG project are being negotiated by PLL, SOCAR Trading, and its affiliates.
Due to disagreements between the Petroleum Division and former PM Shahid Khaqan Abbasi, the ECC has postponed approval of the framework agreement. If Pakistan does not purchase the Azerbaijani cargo, there are no obligations to pay money or fulfil take-or-pay commitments. LNG can only be purchased if a good deal is presented or expensive LNG is absolutely necessary.
The PLL board has been instructed to decide within 24 hours whether to accept or reject LNG cargoes based on SOCAR’s price. The Cabinet Division’s helicopter repair for relief efforts and VVIP movements has also received ECC approval in the amount of Rs404.8 million.
The Ministry of Industries and Production will use the additional funds, which total Rs157.7 million, to pay employee salaries at the Heavy Electrical Complex (HEC), markup to the Bank of Khyber, and cover operating costs.
By June 30, 2023, the Privatisation Commission is to have finished the privatisation of the HEC.