Shortly after the Russian delegation arrived in Islamabad, reports have emerged that Islamabad and Moscow are in talks to sign a government-to-government multibillion-dollar gas deal. As Russia faces backlash from the West for its invasion of Ukraine, it has started to look for other avenues to export its energy products.
Located near Sabetta, the $27 billion Yamal LNG project, recently termed a national interest project, would become a significant source of Russia’s LNG exports. The two countries are already working on energy projects, including the Pakistan Gas Stream, formerly known as the North-South Gas Pipeline, but have not made any significant progress on it due to bureaucratic hurdles.
The agreement would make for a new addition and bolster the energy cooperation between the two countries. According to local media, the Pakistan LNG Limited was in talks with the Russian gas giants – Gazprom and Novatek – to import the gas.
Russia is too far away and Pakistan might face higher freight charges in comparison with LNG cargoes coming from Qatar. However, Russia might have the option to follow LNG cargo swap with other companies operating close to Pakistan that could result in cutting the freight charges
— Economy of Pakistan (@Pakistanomy) March 24, 2022
Pakistan started importing LNG around seven years ago, and the country has since become the ninth largest importer of LNG. Sources privy to the recent talks between the two countries said that the government to government gas deal would help meet the country’s growing demands and significantly take the burden off its depleting gas reserves.
Pakistan had been mainly sourcing its LNG from Qatar, which controls the Pakistani market in terms of LNG imports. Sources privy to the matter state that Pakistan wants to replicate the Qatar gas deal, in terms of the price at which the LNG is imported, with other countries. However, many analysts believe that the benchmark price which Pakistan is trying to apply might cause a hindrance to reach an agreement.
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Moreover, Russia is also very far away from Pakistan, which might lead to higher freight charges and a more expensive LNG compared to what is offered by Qatar. However, to cut the freight charges, Russia might have the option to follow LNG cargo swap with countries operating near Pakistan.
During PM Khan’s recent visit, it was reported that the Kazakhstan gas pipeline was also on the agenda. While addressing a press conference in Islamabad, Energy Minister Hammad Azhar said that we are looking for substitutes to import LNG; he further added that “Laws are being made to mix imported LNG and imported gas with locally produced natural one to ensure supply to the domestic consumers in the country.”
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In that effort, the government recently introduced the WACOG bill, a new method of fixing the price by blending the costs of both local and imported gas to help rationalize gas prices by developing a new final mix product.