Pakistan will renegotiate gas price with Iran under the (IP) gas pipeline project as the price of Turkmenistan-Afghanistan-Pakistan-India (Tapi) gas is cheaper, sources close to Petroleum Secretary told Business Recorder. This was disclosed at a meeting of Economic Co-ordination Committee (ECC) of the Cabinet held on April 12, 2012 under the chairmanship of Finance Minister Dr Abdul Hafeez Shaikh.
The IP gas price was $11 per mmcfd while Tapi was estimated at $13 per mmcfd. However, a week ago in a meeting in the Ministry of Petroleum and Natural Resources it was revealed that Turkmenistan has agreed to reduce the price from 55 percent price parity with international crude price to 45 percent. In addition, Pakistan would also earn a transit fee from Tapi while India is not party to IP anymore.
Official documents available with Business Recorder reveal that the ECC was informed that matter for signing of Gas Sales Purchase Agreement (GSPA) with regard to TAPI gas pipeline project, during the visit of the Turkmen President on 14th November 2011, was placed before the ECC in its meeting held on 11th November 2011. However, the ECC decided that, instead of signing GSPA at this stage, a single-page document containing the intention of both the governments of Pakistan and Turkmenistan, may be signed during the visit of the Turkmen President and the draft GSPA be annexed to that one-page document, for subject approval of the government.
The ECC also constituted a committee for drafting the proposed one-page document. The committee prepared the requisite one-page document (Joint Declaration), which was accordingly signed by both sides on 14th November 2011. Subsequently, the matter of TAPI GSPA including gas price formula, agreed base price, risk sharing mechanism with regard to transportation cost, transit fee and gas price review mechanism was considered by the ECC in its meeting held on 20th January, 2012.
The ECC constituted a committee headed by the Minister for Water and Power to examine the details concerning price and pricing formula for gas to be imported from Turkmenistan and submit its recommendation to the ECC. Qamar-led committee in its meeting held on 6th April, 2012 examined the gas price formula, agreed based price, risk sharing mechanism with regard to transportation cost, transit fee and gas price review mechanism and recommended it for approval of the ECC. Based upon the foregoing, the ECC was requested to approve the draft GSPA for execution by Inter State Gas Systems (Pvt) Ltd with Turkmenistan (Turkmengaz) including gas price formula, agreed to, risk sharing mechanism and gas price review mechanism.
During the ensuing discussion, it was explained that gas to be imported from Turkmenistan will be cheaper than the gas to be imported from Iran. Resultantly, Pakistan will be able to re-negotiate the gas price with Iran. On a query, the ECC was informed that penalty clauses in TAPI GSPA are similar to those contained in Iran-Pakistan GSPA, where-under Pakistan will be liable for payment towards cost of gas even if no gas is imported. These conditions will be effective after construction of pipeline.
The ECC was further informed about different stages of approval of TAPI project, which included approval of the Board of Directors, steering committee set-up by the ECC, the ECC itself and finally by the Cabinet. The project will not go through the CDWP and Ecnec. A concern was expressed that Minister for Finance is included as a member of the steering committee, but he is not aware of any meeting of the committee.
It was explained that the meetings were previously attended by the then Minister of State for Finance. However, the last meeting held in October 2011 was attended by the Finance Secretary due to other commitments of the Minister for Finance. It was opined that TAPI being an important project, meetings of the steering committee should be held more frequently to discuss the details. Another point was made that different aspects of the TAPI project have been brought before the ECC and as such it would be appropriate to make a comprehensive presentation to the ECC on the whole project. Besides it was inquired if there was a cost sharing formula with India as India is also a stakeholder in this project.
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