ISLAMABAD: Pakistan is currently in talks with Azerbaijan in Baku to import POL products on credit, besides providing distressed LNG cargoes at cheaper rates, according to a senior Energy Ministry official. Negotiating a deal to make available in the month.
“Azerbaijan offered to supply finished POL products and LNG to Pakistan on two lines of credit worth $220 million in late 2016. The offer lasted for more than 6 years but Pakistan did not respond positively, which led to Azerbaijan’s State oil firm SOCAR was furious.
A delegation of Pakistan headed by Federal Minister of State Mossadegh Malik, including Secretary Petroleum and a senior official, has gone to Baku to discuss import of POL products on credit and import of distressed LNG cargoes. The Pakistani delegation is in Azerbaijan from February 18, 2023 and will stay till February 23. Mossadegh Malik also visited Azerbaijan earlier for initial discussions on the above topics.
“The two countries previously signed an intergovernmental agreement (IGA) in 2017 to supply Azerbaijan’s state-owned SOCAR with oil and gas products, including furnace oil, petrol, diesel and liquefied natural gas ( LNG).In this regard, SOCAR offered two separate credit lines of $120 million for LNG and $100 million for petroleum products for 60 days.
The ECC on April 23, 2019, the official said, approved the IGA allowing the petroleum division to begin negotiating a commercial agreement with SOCAR. The agreement was signed under UK law but the AG’s office objected to this and suggested that the agreement be signed under Singaporean law. Hence, the matter did not materialize into a deal.
Besides, the official said, the petroleum division itself did not avail itself of the offer to import liquefied natural gas (LNG) on credit as its price at that time was ‘significantly higher’ than the current price of spot cargoes. was Term cargo from Qatar. The State Oil Company of Azerbaijan (SOGAR) also expressed its frustration several times over the prolonged silence of the petroleum division.
Pakistan’s ambassador to Baku, Bilal Hai, had also warned the government in July 2021 to deal with the issue in a manner that would not unnecessarily overshadow the close friendly relations between the two countries. Now Pakistan, which is facing a severe dollar liquidity crisis, wants to enter into an agreement with Azerbaijan to import Mogas on credit and in this regard, Pakistan’s state-owned company Pakistan State Oil and Azerbaijan’s SOCAR have held meetings in the recent past. of are
Pakistan wants the best credit terms for the country and if the deal is done under GtG arrangements, it will ensure sustainable supply of Mogas in the country. “We will ask SOCAR for 1-2 cargoes of Mogas in a month,” said the PSO official.
As for the LNG offer from SOCAR, the official said the firm does not have any LNG with it as it is more committed to European countries. However, Pakistan LNG Limited (PLL) is negotiating an agreement with SOCAR to supply a distressed LNG cargo to Pakistan at cheaper rates if compared to current market prices.
However, SOCAR has offered Pakistan’s state-owned company Pakistan LNG Limited (PLL) distressed LNG cargo when it becomes available from the market. SOCAR shall not be bound to deliver at least one distressed cargo per month to Pakistan. Asked what margin SOCAR would get from PLL while selling the cargo, the official said it was being discussed.
Under the proposed framework agreement, the petroleum division prepared for LNG cargo in one month, the initial one-year period will be extended by another year. One LNG cargo per month shall be offered by SOCAR 45 days prior to the commencement of the relevant delivery window time. Each offer for cargo shall have a fixed validity period during which PLL may accept the offer. The price will be quoted in USD/MMBTU for each cargo 45 days prior to the relevant delivery window. Payment will be made within days of receipt of PLL’s invoice, PPL will issue LC from local bank(s). LC confirmation charges will be on seller’s account. Port charges for SOCAR are limited to $500,000 while all PQA costs, including taxes, will be described as port charges. Each offer shall express the applicable demurrage rate as a fixed amount in USD per day and shall include the appropriate rate for each part of the day. and (x) PLL and SOCAR shall sign a Confirmation Notice, accepted by PLL at the time of offer of any Cargo.
There is no specific pricing formula in the proposed framework agreement and the price of LNG will be quoted in SOCAR USD/MMBTU for each cargo. PLL will review the price offered against the prevailing international price, as well as consult downstream consumers (power sector) to ensure affordability. PLL has not received any bids against recent tenders and is also facing LC issues and cancellation of term cargoes. In the given circumstances, PLL can execute the Framework Agreement with SOCAR as it has no financial obligations or obligations to make or pay commitments. However, LNG can be purchased under the said contract only if an attractive price is offered or as a last resort, expensive LNG is desperately needed.
