China Petroleum Pipeline (CPP) Bureau has conveyed its refusal to construct Liquefied Natural Gas (LNG) terminal at Gwadar on Build- Own- Operate-Transfer (BOOT) to Pakistan but agreed to proceed on EPC basis, well informed sources told Business Recorder. The project envisaged construction of 700-km pipeline having a diameter of 42 inches from Gwadar to Nawabashah. The main objective of the project was to overcome the shortage of natural gas supply by importing LNG at Gwadar and was to be completed in phases. The estimated cost of the project was Rs 203.314 billion.
While describing the background, the sources said that initially sponsors submitted the PC-I and sought its approval (both pipeline and LNG terminal segments); however while planning the project, the sponsors considered various models (EPC, BOOT etc) and proposed that 700-km pipeline segment of the project should be implemented on an EPC basis and LNG terminal be constructed on BOOT basis by the same contractor. ECC approved the proposal and the sponsors submitted PC-I for approval of only 700-km pipeline segment from Gwadar to Nawabshah on BOOT basis and the LNG terminal project on EPC basis.
Ministry of Petroleum and Natural Resources, sources said, was considering submitting a summary to the ECC for a change in the execution methodology of the project. The PC-I in this respect was under preparation by sponsors and would be submitted soon. The sponsors revealed that the Price Negotiation Committee (PNC) constituted by ECC has negotiated the project price with the Chinese and a final discount of $122 million had been made in the project''s EPC cost.
The sources further revealed that the project was considered by the CDWP in its meeting held on June 8, 2016 and recommended in principle, to ECNEC subject to the following conditions: (i) financial arrangement and its terms and conditions should be finalised; (ii) sponsors may resolve the issue of tax exemptions from FBR on the pattern of NHA; (iii) EAD to review the revised lending rate with a new lending policy at the earliest (by June 30, 2016) to avoid expensive loans; and (iv) sponsors may rationalise the cost of the project and provide a cost break-up of each component.
In compliance with the CDWP decisions, the Ministry of Petroleum and Natural Resources/ ISGS had revealed that a formal loan application had been made by the EAD to the Economic and Commercial Counsellor, Embassy of China, to request EXIM Bank of China to proceed with the funding. According to sources, terms and conditions of financing of project would be finalised in due course, adding that a summary had been prepared for tax exemption for the ECC. The matter was under deliberation with EAD and would be addressed based on the response from China Exim Bank. The overall cost of the project has been rationalised from Rs 228.859 billion to Rs 203.314 billion.
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