$3.5 billion LNG pipelines: government all set to ink deals with Chinese, Russian companies

Pakistan is all set to ink commercial agreements with Chinese and Russian government-nominated companies for the construction of Gwadar-Nawabshah and Karachi-Lahore Liquefied Natural Gas (LNG) pipelines costing $3.5 billion.
Mobin Solat, Managing Director (MD) Inter State Gas Systems (ISGS) said this while briefing the National Assembly Standing Committee on Petroleum and Natural Resources here Thursday. He said the agreement with Chinese state owned company will be finalised in the first week of May and the agreement with Russian company in June, 2016.
The meeting was held under the chairmanship of Chaudhry Bilal Ahmed Virk, MNA was informed that China will lay Gwadar-Nawabshah LNG pipeline at an estimated cost of $1.5 billion and Russia will construct Karachi-Lahore pipeline at a cost $2 billion.
Solat said that both the pipelines will be completed by the end of 2017, adding that construction of the pipelines will enable the country to transport up to 1.2 Billion Cubic Feet per Day (BCFD) imported LNG to up country.
He said that in phase one LNG terminals in Gwadar and Karachi will be built each with a capacity to handle 600 Million Cubic Feet of LNG and in second phase additional one each LNG terminal in Karachi and Gwadar will be completed with same capacity.
China Petroleum Pipeline Bureau (CPP) will construct pipelines from Gwadar to Nawabshah for which the commercial entities from both sides (ISGS from Pakistan and CPP from China) have formally engaged pursuant to the signing of Government to Government Framework Agreement on 20th April 2015. Both sides have held several meetings wherein the Confidentiality Agreement has been signed and project related information has been exchanged. Negotiations with Chinese side are at advance stage.
Tender documents for the Project were handed over to CPP, in accordance with the contract documents, CPP submitted its proposal on 30th September 2015 and technical proposal has been evaluated by the Consultant (ILF-NESPAK JV) and approved by ISGS Board. The commercial proposal is currently under evaluation.
To meet financing requirements, letter from the EAD has been issued to the Govt. of China. Funds to meet 15 percent of the local component are being arranged to meet land acquisition costs and security arrangements.
The CPP has expressed its readiness to expedite the financing arrangement as soon as formalities of PC-I and loan application are submitted by EAD to China. Furthermore, financing arrangement directly to ISGS through preferential Buyers Credit can be explored if backed by sovereign guarantee.
To complete the pipeline and LNG terminal at Gwadar by December 2017, CPP expects to conclude all technical and commercial aspects of the project implementation by the end of April 2016 including signing of the contract. CPP is ready to start construction of the pipeline segment of the Project from Gwadar to Nawabshah on immediate basis.
The ECC in its meeting held on 11th April, 2016 considered the restructuring of the Project and approved immediate start of work on gas pipeline segment of the Project under the G to G Framework Agreement for which necessary financing arrangement will also be done by CPP. Work on Gwadar LNG terminal will be undertaken on BoT basis. The consultancy cost for LNG Terminal will be borne by GHPL. The approval of PC1by the Central Development Working Party and Ecnec will be expedited by MP&NR.
The government of Pakistan will issue sovereign guarantee for the gas pipeline portion of the project.
The committee while discussing the issue of provincial royalty on oil/gas production expressed serious reservations over under utilisation of royalty in oil/gas producing districts.
The committee observed that provincial governments were discriminating with the Oil and gas producing district and Tehsil in terms of allocation and utilisation of royalty and production bonus. The committee directed the representative of Provincial Energy Departments to present details of the royalty remitted to the provinces by the federal government and its subsequent allocation by the provinces. The Committee also directed them to submit details of executed and ongoing schemes in the relevant oil and gas producing District and Tehsils. The Committee also directed them to involve local representatives in identification of development schemes in future.
The officials of the four provincial energy departments failed to satisfy questions raised by MNA Nisar Khattak over the utilisation of 10 percent of oil/gas royalty in the gas producing regions.
The committee directed provincial energy departments to give all the details of royalty utilizations in past three years within a month. The meeting also asked Director General Petroleum Concession (DGPC), Saeed Ullah Shah to verify the figures provided by the provincial energy departments.
Ilyas Shahid, Director Federal Investigation Agency (FIA) while briefing the committee on the issue of crude oil theft in Karak and Bannu districts of KPK said that as per initial findings some officials of the MOL were involved in the oil theft. The committee directed FIA to acquire necessary documents from relevant departments and conduct a thorough inquiry into the reported theft of crude oil from NASHPA Oil field, District Karak, Khyber Pakhtunkhawa (KPK).
Committee member Nisar Khattak and others expressed serious concerns over the arrest of MOL security staff member by police who brought the issue of oil theft into the knowledge of company officials.
Additional Secretary Energy KPK informed the committee that as per rough estimates crude oil worth billions of rupee was stolen from the pipeline. The committee also directed FIA to submit its preliminary findings to the Committee by 24th May, 2016.
The committee was apprised that initial findings of the FIA point towards involvement of employees of the company operating the oilfield besides several private individuals. The representative of Khyber Pakhtunkhawa Energy Department informed that this department also conducted an inquiry which substantiates involvement of several persons into the theft causing colossal loss to the national exchequer. The committee directed him to provide the report to the FIA so that inquiry could proceed ahead.
The committee while discussing the current status of exploration and production companies whose licenses were either revoked or served with show-cause notices, directed the Director General (Petroleum Concession) to pursue the court cases for early decision. The committee was apprised that non-performing licenses were revoked out of which 12 licenses went into litigation and were granted stay orders. The committee also directed the FIA and the NAB to pursue inquiries of cases of Ministry of Petroleum and Natural Resources and its attached departments and submit cases to courts for decision.