ENERGY
By Manzoor Shaikh
The Economic Coordination Committee (ECC) of the Cabinet approved the establishment of an International Joint Trading Company in Singapore by Pakistan State Oil (PSO) and the State Oil Company of Azerbaijan Republic (SOCAR) last week, according to a communication from the federal government issued to the media.
The Committee also instructed the Ministry of Petroleum to ensure due diligence regarding specific investment approvals, particularly equity injections, as well as a timeline for the company’s operational launch.
The new joint venture, named PSO-SOCAR Trading Pte. Ltd., will be a collaborative effort between PSO and SOCAR, with the company based in Singapore.
The ECC directed the Ministry of Petroleum to ensure that all necessary financial and regulatory aspects of the investment process are thoroughly reviewed. Media reports indicate that PSO is set to deposit $0.5 million in a Singaporean bank as a mandatory requirement for the company’s registration.
OSCAR (officially called SOCAR Trading S.A.) is a subsidiary of SOCAR, specializing in trading and marketing oil, gas, and petroleum products in international markets. It manages the commercial and trading operations of SOCAR’s upstream and downstream activities.
What is OSCAR’s standing in the market?
OSCAR has a strong presence in the Caspian Sea region, trading oil and gas products, including LNG, primarily in regions where SOCAR is already established, such as Central Asia, the Middle East, and parts of Europe. Its market share is growing, especially with strategic partnerships like the one with PSO in Singapore.
While OSCAR is competitive in some regions, reports suggest it is not yet a dominant player on the scale of energy giants like Shell or TotalEnergies. However, with access to SOCAR’s production and resources, as well as its expanding presence in LNG trading, OSCAR could increase its market share.
OSCAR faces competition from multinational companies and emerging regional players. Yet, with its partnership with PSO, OSCAR can leverage the Singapore hub to access a broader global market. The company will need to scale operations and build a reputation for reliability in LNG supply and trading to compete effectively on a larger scale.
What will PSO gain from the partnership?
The joint venture in Singapore will focus on purchasing liquefied natural gas (LNG) from the spot market. With SOCAR’s extensive experience and established presence in the global LNG sector, PSO is expected to leverage SOCAR’s international market connections to enhance its trading capabilities.
This strategic partnership aims to enhance Pakistan’s energy security by securing reliable LNG supplies through an internationally recognized trading hub.
In December 2024, the Board of Management (BoM) of PSO approved a Sale Purchase Agreement (SPA) with SOCAR. A month earlier, the ECC approved the signing of an SPA for petroleum product supply between PSO and SOCAR.
This agreement makes PSO the second Pakistani company, after Pakistan LNG Limited (PLL), to import gas from the Azerbaijani energy company. In July 2024, PLL and SOCAR signed a landmark LNG purchase framework agreement, a significant milestone in bilateral energy cooperation between the two nations.
The framework agreement stipulates that SOCAR may offer one LNG cargo per month to PLL, subject to demand in Pakistan and commercial considerations, ensuring a reliable and consistent LNG supply to meet the country’s growing energy demands.
How is PSO’s partnership different from PLL’s?
The partnership between PSO and OSCAR focuses primarily on establishing a joint trading company in Singapore to engage in LNG trading on the spot market. This venture aims to enhance PSO’s ability to secure LNG supplies from the global market, diversify procurement strategies, and increase its presence in international LNG trading.
This partnership emphasizes expanding PSO’s international footprint and strengthening energy security for Pakistan by providing access to more flexible, competitive LNG pricing. In contrast, the collaboration between OSCAR and PLL is focused on LNG procurement and supply for Pakistan. OSCAR provides sourcing, transportation, and supply chain management services to PLL, which ensures LNG imports for domestic consumption.
The OSCAR-PLL partnership is designed to guarantee a steady and reliable supply of LNG to meet Pakistan’s domestic energy needs, making it more operationally focused. OSCAR acts as an intermediary to help PLL fulfill the country’s energy demand.
How will PSO benefit financially?
While the specific annual financial benefits that PSO expects from its joint venture with SOCAR in Singapore have not been publicly disclosed, the collaboration aims to enhance PSO’s ability to purchase LNG from the spot market by leveraging SOCAR’s extensive experience and international market connections.
Although the exact financial gains remain unspecified, the joint venture is expected to strengthen Pakistan’s energy security by ensuring reliable LNG supplies through a globally recognized trading hub.
Establishing a joint trading company in Singapore—a major energy trading hub—marks PSO’s entry into the international LNG market. Being associated with SOCAR, a state-owned energy giant with a growing global presence, could improve PSO’s credibility and reputation.
Collaborating with SOCAR, which has a solid track record in energy resources and LNG trading, positions PSO as a trusted partner in international markets. This partnership will signal to investors and stakeholders that PSO is expanding its capabilities and playing a more prominent role in global energy trade.
Who will be the competitors of this new company?
The new joint company formed by PSO and SOCAR in Singapore will face competition from several global players in the LNG trading and energy sectors. Key competitors include Royal Dutch Shell, BP, TotalEnergies, ExxonMobil, Chevron, Gazprom, and Qatar Energy.
These companies, with their established infrastructure and extensive resources, are formidable competitors in LNG procurement and global energy markets.
Risks involved with the PSO-SOCAR venture
SOCAR’s home country and Pakistan both face geopolitical challenges, and any instability in these regions could impact the joint venture’s operations, particularly regarding LNG supply routes or pricing. Changes in diplomatic relationships, trade sanctions, or regional conflicts could disrupt LNG flow.
The LNG market is also susceptible to international trade disputes or tariffs. The joint venture will need to navigate complex global trade dynamics, which could present risks, particularly in terms of regulatory hurdles or tariffs imposed by major energy-producing countries.
The author is the Editor of Engineering Review – Linked
