ISLAMABAD: Azerbaijan State Oil Company (Socar) has expressed frustration over the Petroleum Division’s prolonged silence over its offer of providing two credit lines of over $220 million for oil and gas supplies to Pakistan.

Informed sources told Dawn that Pakistan’s ambassador to Baku, Bilal Hayee, had alerted the government back home to deal with the matter in a manner that did not unnecessarily cast shadow over close friendly relations between the two countries.

The two governments had agreed during a visit of Azerbaijan’s foreign minister to Pakistan in January to expand bilateral cooperation through oil and gas sector engagements to build upon strategically friendly relationship between the two countries.

Ambassador cautions against harming bilateral ties

As a follow-up from Azerbaijan, Socar Trading — a commercial arm of State Oil Company of Azerbaijan Republic — formally offered in March to supply petroleum products and LNG cargos to Pakistan State Oil (PSO) and Pakistan LNG Limited (PLL) round the year on credit under a government-to-government (G2G) arrangement.

The offer involved two separate credit lines of $120m for LNG and $100m for petroleum products for 60 days, according to Ambassador Hayee who said that Chief Operating Officer of Socar Toghrul Kocharli had approached him to inquire about Pakistan government’s response to the comprehensive proposal made by Socar. Special Assistant to the Prime Minister on Petroleum and Power Tabish Gohar did not respond to calls for comment.

According to a diplomatic note seen by Dawn, Mr Kocharli had expressed “frustration on the prolonged silence and lack of response from the Petroleum Division”. He quoted Mr Kocharli as saying that Socar “is still willing to engage with Pakistan side to help in bridging the energy needs of brotherly Pakistan but the window of the offer made in March was not indefinite”.

Ambassador Hayee informed the government that one of the closet friends, Azerbaijan, had a lot of goodwill and respect for Pakistan and a number of initiatives were currently under way to intensify and expand bilateral economic engagements. The two countries have been supporting their respective positions on issues of Kashmir and Nagorno-Karabakh at all international forums.

Therefore, he desired the petroleum division to engage with Socar to find a mutually workable arrangement for supply of LNG and petroleum products in line with national priority and needs.

A senior government official agreed that there was no big deal if an offer was declined on commercial or other considerations, but cold shouldering friendly engagements was an undesirable move and should be looked into seriously.

Azerbaijan is a major producer of oil and gas and operates several oil and chemical refineries in many countries. The two sides had entered into an inter-governmental agreement (IGA) in February 2017 for supply of a number of oil and gas products, including furnace oil, petrol, diesel and liquefied natural gas.

Since last year, Socar has also been in discussions with both PLL and PSO on term agreements that includes a G2G arrangement for supply of at least one cargo a month at prices linked to Japan Korea Marker (JKM) plus some negotiable premium. Socar has also offered an unconditional rolling credit line without any sovereign guarantee, letter of credit or standby letter of credit. The PLL’s spot cargos have so far remained in the range of JKM minus 0.5 to JKM plus 0.99.

The sources said the Socar had also been awaiting a final decision on supply of petrol (motor gasoline) contract with PSO after more than two years of negotiations.

Published in Dawn, July 12th, 2021