ISLAMABAD: The Economic Coordination Committee (ECC) may allow Pakistan LNG Limited (PLL) to execute a proposed framework agreement (FA) with SOCAR/SOCAR Trading for the import of LNG from Azerbaijan.

The summary of the Petroleum Division could not be discussed in the meeting of the ECC held on March 8, 2023, and was deferred. However, the matter will likely be taken by the forum in the coming meeting, sources said.

The ECC may allow PLL to sign a pact with Azerbaijani company M/s SOCAR/SOCAR Trading for import of one LNG cargo monthly.

The PLL has also been exploring availability of LNG volume through Government-to-Government (G2G) agreements with different countries.

Import of LNG: ECC is all set to approve PLL-SOCAR pact

In this regard, an Inter-Government Agreement (IGA) has already been signed between the Government of Pakistan and the Government of Azerbaijan on February 28, 2017 for cooperation in the field of energy, and PLL and State Oil Company of Azerbaijan Republic (SOCAR), SOCAR Trading and its subsidiaries have been nominated to negotiate necessary contractual details on LNG project.

The SOCAR has offered LNG through a framework agreement under the G2G arrangement. The PLL has requested for approval of framework agreement, having following salient features: (i) initial one-year term extendable to another one year; (ii) one LNG cargo per month to be offered by SOCAR 45 days prior to the start of the relevant delivery windows; (iii) each offer for the cargo will have a set validity period during which PLL may accept the offer; (iv) price shall be offered in USD/MMBTU for each cargo,45 days prior to the relevant delivery window; (v) cargo quantity - 3,200,000 MMBTU 5%; (vi) payment term within days following PLL’s receipt of the invoice; (vii) PPL to issue LC from local bank(s). LC confirmation charges shall be on sellers’ account; (viii) port charges for SOCAR capped at USD 500,000 whereas all PQA costs, including taxes, shall be defined as port charges; (ix) each offer will include the applicable demurrage rate expressed as a fixed amount in USD per day and pro rata for each part of a day; and (x) PLL and SOCAR will sign a confirmation notice, at the time of the offer for any cargo is accepted by PLL.

The proposed framework agreement does not contain any specific pricing formula and the LNG price will be quoted for each cargo by SOCAR in USD/MMBTU. The PLL will evaluate the offered price in comparison with the prevailing international price, as well as, consult downstream customers (power sector) to ensure affordability.

Copyright Business Recorder, 2023