Pakistan considers buying LNG from Azerbaijan’s SOCAR as contingency plan

Pakistan is bracing for possible disruption to its gas supply as cargo deliveries from Qatar could disruption after the Gulf country stopped producing LNG in the wake of missile attacks from Iran, local media The News reported on March 3.

The Asian country’s existing long-term agreements with the world’s second-largest LNG exporter include the delivery of nine cargoes of the super-chilled fuel per month. Pakistan also has a long-term agreement in place with Italy’s Eni for delivery of one LNG cargo a month.

With LNG deliveries from Qatar in question, Islamabad has indicated that it will immediately restore domestic gas output to 350mn cubic feet (10mn cubic metres) per day. This supply had previously been curtailed due to pipeline pressure.

The country’s contingency plan also includes potentially buying as much as 250mn cubic feet (7mn cubic metres) per day of gas from Azerbaijan state-owned oil and gas company SOCAR.

In July 2023, Islamabad inked a supply deal with SOCAR and Pakistan could buy additional LNG cargoes under a one-year framework agreement, which also has the potential to be extended for another year.

Nevertheless, the cargoes are dependent on availability as SOCAR has a handful of fixed contracts in place with China, India, and Japan that could limit availability.

In November, Pakistan reached an agreement with Eni (ENI.MI) to cancel 21 LNG cargoes under a long-term supply deal, as part of efforts to manage a mounting gas surplus in its domestic network. These cargo deliveries cannot now be reinstated.

Similarly, Islamabad also negotiated with Qatar for two cargoes a month to be diverted in 2026. Another 10 cargoes for 2027 were also agreed to be cancelled at the insistence of Sui Northern Gas Pipelines Ltd (SNGPL).

Pakistan’s long-term deal with Qatar was signed in 2015 for 15 years. However, in recent years the deal had become to be seen as a burdensome and inflexible arrangement with Islamabad frequently struggling to offload surplus gas amid subdued domestic demand.

In the near term, Pakistani officials have cautioned that gas demand for the rest of the month should be manageable due to reduced heating and cooling needs in March.

However, if demand were to unexpectedly spike, extended load management may need to be enacted for industrial and commercial customers.