Pakistan’s finance ministry announced on Wednesday that it has approved a framework for a liquefied natural gas (LNG) purchase agreement with Azerbaijan. Due to the surge in global LNG prices following Russia’s invasion of Ukraine, Pakistan had not procured any spot cargoes of LNG for approximately a year. This shortage of gas, which fuels many of Pakistan’s power plants, led to prolonged power outages in the country, affecting its population of 220 million.
Pakistan faced a severe balance of payments crisis, preventing it from competing in the high-priced LNG market. However, Islamabad recently issued tenders to acquire two spot LNG cargoes. The Asian spot LNG prices have decreased from the record highs of $70/mmBtu reached in August and are currently trading below $10.
The approval for the LNG deal was granted during a meeting of Pakistan’s finance ministry’s Economic Coordination Committee. The committee authorized the “framework agreement between Pakistan LNG Limited and State Oil Company of Azerbaijan Republic (SOCAR).” This decision coincides with Pakistani Prime Minister Shehbaz Sharif’s visit to Azerbaijan on the same day. Sharif expressed his intention to discuss various areas of cooperation, including energy, banking, financial services, and IT sectors.
Specific details of the LNG agreement, such as price and contract type, have not been disclosed. Pakistan’s Petroleum Minister, Musadik Malik, stated that Azerbaijan will supply one LNG cargo per month at a price lower than the market rate. The LNG supply will be fulfilled by Azerbaijan’s SOCAR Trading.