Pakistan to import LNG from Azerbaijan amid gas glut and supply concerns
Pakistan has decided to import liquefied natural gas (LNG) from Azerbaijan next month despite an ongoing surplus of imported gas and deferred shipments from Qatar. The move was confirmed after Pakistan LNG Limited (PLL), a state-owned entity, convened emergency meetings to address the anticipated January shortfall in gas supplies.
Public utility Sui Northern Gas Pipelines Limited (SNGPL), which serves Punjab, Khyber Pakhtunkhwa, and Islamabad, requested at least one LNG cargo for January, citing a potential supply gap. SNGPL’s projected demand for January stands at 1,850 million cubic feet per day (mmcfd), while the available supply is estimated at 1,750 mmcfd, even after fully utilizing domestic gas.
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The LNG will be purchased from the State Oil Company of Azerbaijan (SOCAR) under an existing framework agreement. SOCAR’s offer will be reviewed on Monday, with a two-hour validity for approval, according to the Petroleum Division.
Deferred Qatar Deliveries and Domestic Cuts Raise Questions
This development comes after Petroleum Minister Dr. Musadiq Malik announced the deferment of five LNG shipments from Qatar to 2026 due to a gas glut. Local producers have also been instructed to reduce production by 250-300 mmcfd, further raising concerns about the necessity of importing more expensive LNG under short-term contracts.
Critics, including some PLL board members, have questioned the move, citing SOCAR’s past supply record and the decision to reduce local exploration while opting for costlier imports. One board member stated, “Importing LNG at a much higher price while asking local producers to cut supplies requires explanation.”
Economic and Energy Context
Pakistan produces a third of its electricity from natural gas, but demand has declined by 8%, primarily due to higher tariffs. This reduction in electricity demand has left 150 mmcfd of LNG surplus in SNGPL’s system. Redirecting supplies to residential consumers could lead to higher tariffs, while suspending supplies to captive power plants conflicts with IMF conditions.
Under a broader Inter-Governmental Agreement (IGA) signed in 2017, Pakistan and Azerbaijan committed to enhancing cooperation in energy, including LNG trading, storage, and joint exploration projects. The Economic Coordination Committee (ECC) approved the sale-purchase agreement last month, with payments for each cargo due within 30 days of delivery.
Outlook for January and Beyond
While the immediate focus is on addressing the January shortfall, experts have flagged that by 2025, Pakistan could have 12 surplus LNG cargoes without cutting supplies to captive power plants. The government’s decision to pursue Azerbaijan’s offer comes amidst balancing short-term energy needs, IMF stipulations, and local economic pressures.
The bid from SOCAR is set to reveal its pricing on Monday, which will determine whether this import decision aligns with Pakistan’s broader energy strategy.
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