“Distressed cargo is a term used more in bulk trades and cargo is termed distressed when a buyer defaults on a contract due to a drop in commodity prices.”
The deal will be signed with Pakistan LNG Limited (PLL) which is a 100 percent state-owned company. SOCAR Trading Company-UK is a subsidiary of the State Oil Company of the Republic of Azerbaijan (SOCAR). Prime Minister Shehbaz Sharif will also witness the signing of the agreement.
The agreement will, he said, be signed for one year which will be extendable to another one year. Under the agreement, SOCAR Trading Company-UK will offer one LNG cargo 45 days prior to the start of the relevant delivery window and each offer for the cargo will have a set validity period during which PLL may accept the offer.
Under the deal, Pakistan will be having the right of refusal if not required and it will buy LNG only when necessary. About the discovery of the price for the decision to buy LNG, the senior officer said that the gas purchase would be considered if it proves cheaper, based on a thirty-day average of two international LNG standards.
Under the agreement, the price will be offered in US dollars per MMBtu for each cargo, 45 days prior to the relevant delivery window. The quantity of the LNG cargo will be 3200,000 MMBtu+/-5 percent and the payment will be made within 30 days following PLL’s receipt of the invoice.
Pakistan LNG Limited (PLL) will issue a letter of credit from the local bank and the port charges for SOCAR are capped at $500,000 whereas all Port Qasim Authority (PQA) costs including taxes, shall be defined as port charges.
Each offer will include the applicable demurrage rate expressed as a fixed amount in US dollars per day and pro rata for each part of a day. PLL and SOCAR will sign a Confirmation Notice, at the time of the offer for any cargo is accepted by PLL.
It is pertinent to mention that an Inter-Governmental Agreement (IGA) has already been signed between the governments of Pakistan and Azerbaijan on 28 February 2017 for cooperation in the field of Energy and Pakistan LNG Limited (PLL) and State Oil Company of Azerbaijan Republic (SOCAR), SOCAR Trading and its subsidiaries were nominated to negotiate necessary contractual details on LNG project.
Pakistan State Oil (PSO) and Pakistan LNG Limited (PLL) are currently importing LNG under long-term LNG supply contracts to minimize the gap in demand and supply of gas under three pacts.
The first long-term agreement was signed by PSO with Qatar Gas in 2015 at 13.37 percent of price (slope of Brent) for five cargoes monthly for 15 years.
The second PSO-Qatar Gas agreement was inked in 2021 at 10.2 percent of price (slope of Brent), for 10 years, according to which Qatar Gas company is to supply three cargoes monthly from July 22 to December 23 and four cargoes monthly from Jan 2024 to December 2032.
PLL-ENI signed an agreement in 2017 at 12.05 percent of the price (slope of Brent) according to which ENI is to supply one cargo per month for 15 years.
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