Pakistan Turns to Azerbaijan for LNG Amid Energy Crisis

Pakistan's energy crisis has led to a decision to import liquefied natural gas (LNG) from Azerbaijan next month, as the country faces a shortage of domestic supplies despite having long-term agreements for higher-priced LNG imports.

Pakistan has taken a decisive step to address its ongoing energy crisis by deciding to import liquefied natural gas (LNG) from Azerbaijan. At an emergency board meeting of Pakistan LNG Ltd, it was decided to bring in the LNG cargo from Azerbaijan next month in response to the country's oversupply of imported gas. This decision comes as a result of a reduction in domestic gas production and the deferment of five LNG cargoes from Qatar due to a glut in the system. The country has been experiencing an oversupply of gas, which has led to a reduction in local gas exploration to manage the surplus. Pakistan is experiencing a significant decline in domestic gas production, which is having a direct impact on its electricity generation. The country gets over a third of its electricity from natural gas, but demand has seen a significant decline of 8% due to higher tariffs and curbing household consumption. The move to import LNG from Azerbaijan comes as the government asks local producers to curtail their gas production. One of the producers has agreed to reduce its output by 150 million cubic feet per day, going from 150 million to 100 million cubic feet per day. Despite the efforts of the government and LNG companies, the country is still struggling to meet the demand. Pakistan has been in talks with Qatar to defer the delivery of 10 LNG cargoes next year due to the decline in electricity consumption. The government has already cancelled five LNG cargoes under long-term agreements. According to reports, the consumption of LNG in the country has declined due to high energy costs, sluggish economic activity, and excess electricity capacity. The installed capacity of 40,000MW of electricity has come down to around 11,000MW, showing the severe strain on the system. In an effort to boost its energy sector, Pakistan has been in talks with Saudi Arabia for investment, including a proposed $8-10 billion greenfield refinery. Despite the mild economic activity, the Saudi side has already signed agreements worth $2.7 billion with various sectors. The government has not ruled out importing oil from Russia but denies media reports of a discounted rate deal for such imports. The country is clearly looking to diversify its energy sources and stabilize the gas supply chain to meet the growing demand for electricity.