Pakistan is locked in price negotiations with Iran to import some 75,000 mt of LPG over one year after signing a preliminary agreement last week, which would make it the first regular purchaser of LPG from the Middle Eastern producer after Western sanctions were lifted, a top executive said.
The All Pakistan Liquefied Petroleum Gas Distributors Association and National Iranian Oil Co. inked the memorandum of understanding in Dubai on May 3, seeking to buy around 6,200 mt/month over mid-2016 to mid-2017, Irfan Khokhar, chairman of the association told Platts this week.
Khokhar declined to give further details on the matter before the final contract is sealed. He had told local media the price of imported LPG would be in line with the domestic market, adding that the volumes would help limit Pakistan's energy crisis.
Pakistan imported around 245,578 mt of LPG last year, up from just 62,117 mt in 2014, he said. Between January and April this year, the country imported 150,056 mt of LPG, he added.
Pakistan's LPG production in the first four months this year was 213,191 mt, while total sales were 203,247 mt, he said. Production in 2015 was 629,509 mt, with total sales of 875,087 mt; while 2014 production was 440,115 mt with total sales of 502,233 mt, he added.
Pakistan's top exploration and production firm, Oil & Gas Development Co. Ltd. recorded a 27% jump in LPG output in the six months to December 31, 2015, due to the startup of production from the Sinjhoro and Jakhro fields, the company had said.
But OGDC produced 1.116 Bcf/day of gas in H2 2015, down from 1.173 Bcf/day in the same period a year before, due to falling output from some of its mature hydrocarbon-producing fields, as well as falls in the share of crude oil and gas production from non-operated joint-venture fields.
PAKISTAN'S ENERGY WOES
Pakistan has been short of energy for the last decade. Gas output has stalled at 4.2 Bcf/day while demand has jumped to 6.2 Bcf/day in the summer season, while in winter the demand ranged between 6.6 and 6.8 Bcf/day of gas.
The government has been rationing and managing gas supplies to industries, residential consumers, CNG pump owners and power plants.
If the LPG deal with Iran were to go through, it will be the second major import contract following Pakistan's approval last month of a 15-year sales and purchase pact with Qatar to buy an initial three cargoes each month of LNG.
Iran exported around 4 million mt of LPG in 2015, mainly to China, though some cargoes also went to Egypt, Iraq, Pakistan and India, even as sanctions remained in force at that time, shipping sources had said.
Last year's shipments were made possible despite sanctions, as Iranian traders and some buyers have access to vessels and insurance covered by Iran's Kish P&I Club and Qeshm International Trust Alliance P&I Club, which were homegrown following the sanctions.
Shipping sources had said two small vessels, each carrying almost 6,000 mt of LPG, occasionally make trips to Port Qasim, in Karachi. According to cFlow, Platts' ship tracking software, the vessel Black Pearl last made the journey to Port Qasim late June, as well as late February last year.
The Liberty N was in Port Qasim around June 13 and the end of May 2015, cFlow data showed. Pakistan has also been grappling with a number of obstacles in its LPG industry, including high domestic prices and smuggling.
Khokhar said there are only 12 approved LPG Cylinder Manufacturing Factories in Pakistan and about 350-400 uncertified manufacturers in the Gujranwala industrial city in Punjab alone.
"There is an average of one blast of sub-standard LPG cylinders and valves in Pakistan and we lost an average two to four lives on a regular basis. We lost approximately 1,200 lives due to substandard blasting per year all over Pakistan," he said, adding that the association has escalated this matter to the prime minister and other related government agencies.
