KARACHI: Pakistan approved a framework agreement on Wednesday for the import of Liquefied Natural Gas (LNG) from the State Oil Company of Azerbaijan Republic (SOCAR), which is expected to arrange a $120 million credit line for the commodity, according to officials.
The Economic Coordination Committee (ECC) of Pakistan’s federal cabinet discussed a summary presented by the energy ministry and petroleum division regarding the framework agreement between Pakistan LNG Limited (PLL) and SOCAR.
“The ECC after detailed discussion allowed PLL to execute the proposed framework agreement with SOCAR Trading,” the finance ministry said in a statement. “The ECC directed Ministry of Petroleum to determine our need of LNG at least three months in advance on a rolling basis.”
The development occurred ahead of Prime Minister Shehbaz Sharif’s visit to Azerbaijan. Sharif, accompanied by the state minister for petroleum, Musadik Malik, left for Baku on Wednesday afternoon, according to the Prime Minister’s Office.
The agreement framework has been under consideration since February of this year when the petroleum division submitted the summary to the ECC for the import of energy products, including LNG, on deferred payments from Azerbaijan.
“Under the framework agreement, [Pakistan] will [be] informed about the availability of cargoes and their prices,” a petroleum division official told Arab News on condition of anonymity since he was not authorized to speak to the media. “If it suits us, we will accept. Otherwise, we can reject without any liability.”
SOCAR is expected to arrange credit lines, which were offered back in 2016, with local banks and financiers. Pakistan is expecting credit lines of $120 million for LNG and $100 million for the import of oil, according to officials.
The agreement will allow the country to avail the deferred payment facility for 60 days.
Cash-strapped Pakistan has been out of the spot LNG market since June 2022 due to skyrocketing prices and depleting foreign exchange reserves, which dropped to $3.9 billion where it could not even provide an import cover of a month.
On Tuesday, PLL floated two separate tenders for LNG imports from the spot market as prices cooled down in the international market from a record high of $69.9 per million British thermal units (mmBtu) for Asia in August 2022.
The first tender sought bids for six cargoes, three for October and three for December. The second tender is for the procurement of two LNG cargoes in January and one in February.
Pakistan meets more than half of its LNG demand through long-term import contracts, while the gap is filled by spot cargo purchases. The country has long-term agreements with Gunvor and ENI for the supply of one LNG cargo every month.
During the last 10 months of the outgoing fiscal year, Pakistan imported petroleum products worth $13.97 billion, including $3.1 billion worth of LNG.
According to Pakistan Bureau of Statistics data, overall imports of the petroleum group have declined by 18 percent, including a 16 percent decline in LNG imports.
