Pakistan is ready to sign a long-term agreement with Azerbaijan to import liquefied natural gas (LNG) at the world’s cheapest spot price, bringing significant relief to businesses and households in the country. The agreement is scheduled to be signed at the government-to-government level on today (Monday), according to State Minister for Petroleum Musadik Malik.
The agreement mandates Azerbaijan to offer one cargo of LNG at the prevailing world’s lowest price every month, providing Pakistan the flexibility to accept or reject the offer without giving any reason. To ensure transparency and prevent corruption, the Cabinet has approved an algorithm that guarantees the LNG cargo will be offered at the most competitive price.
This algorithm outlines several criteria for acceptance, including the requirement for LNG fuel, the price competitiveness compared to other fuel sources for the month, and the availability of sufficient foreign exchange to make the purchase. Additionally, the offered price must be lower than the previous 30-day average on the LNG indices and must be the lowest price available on the day the cargo is offered.
In this unique business deal, Pakistan has the right to reject all 12 cargoes offered over a one-year period without any explanation. However, Azerbaijan is bound to offer the next cargo the following month and in the years to come. This agreement presents an unprecedented opportunity for Pakistan to access affordable LNG from around the world through Azerbaijan’s extensive trading network.
Malik emphasised that the benefits of this deal would extend to all industries and households in Pakistan. The objective of the agreement with Azerbaijan is to make cheaper fuels accessible to industries while also alleviating the burden on households.
Regarding the supply of subsidised gas to fertiliser manufacturers, Malik opposed renewing the agreement and instead proposed a direct subsidy to farmers to reduce their input costs.
