In a historic move aimed at supporting businesses and households during challenging times, Pakistan has forged a significant agreement with Azerbaijan to secure liquefied natural gas (LNG) at the world’s most competitive spot price.
The deal, signed between Pakistan LNG Limited (PLL) and SOCAR Trading Company, the international marketing and development arm of Azerbaijan’s State Oil Company, promises to strengthen bilateral ties and foster economic growth between the two brotherly nations.
Prime Minister Shehbaz Sharif, who presided over the signing ceremony lauded the agreement as a pivotal moment for both countries. Under the terms of the agreement, Azerbaijan will supply one LNG cargo every month at the lowest possible price in global markets, with a one-year term extendable for another year.
What sets this deal apart is Pakistan’s option to reject any offered cargo without incurring any monetary penalty, a departure from standard industry practices. “This agreement marks a new era of cooperation between Pakistan and Azerbaijan,” Prime Minister Shehbaz Sharif declared.
He attributed the success of the negotiations to the kind leadership of Azerbaijan’s President Ilham Aliyev and the extensive discussions held during his visit to the Eurasian nation.
In another bid to strengthen ties, Pakistan has granted landing rights to Azerbaijan’s airline in major cities like Karachi, Lahore, and Islamabad.
The move is intended to promote tourism, boost investments, and facilitate exchanges between the two nations’ delegations.
State Minister for Petroleum Musadik Malik explained that to ensure transparency and prevent corruption, the Pakistani government has implemented an algorithm approved by the Cabinet, guaranteeing that LNG cargoes will be offered at the most competitive prices possible.
The algorithm factors in criteria such as LNG fuel requirements, price competitiveness compared to other fuel sources, and availability of foreign exchange for purchase.
PM Sharif further reassured the public that despite the recent increase in power tariffs due to IMF obligations, the government remains committed to protecting the most vulnerable segments of society.
The tariff hike only affects those consuming over 200 units of electricity per month, saving 63% of households from the impact. Additionally, partial subsidies are being provided to another 31% of households.
Pakistan has long grappled with energy deficits, heavily relying on imports to meet local demand, which constitutes nearly one-fourth of the country’s total imports or $52 billion in FY23.
As part of its strategy to reduce reliance on imports and preserve foreign exchange reserves, Pakistan is increasingly leveraging local sources of energy.