Pakistan, Russia sign amended North-South Gas Pipeline agreement

In a landmark decision, Pakistan and Russia have formally signed an amended Inter-Governmental Agreement (IGA) for the flagship project of the North-South Gas Pipeline (NSGPP) on Friday.

The pipeline being built by Russia extends 1,122 km from Pakistan’s Punjab province (Kasur) to Port Qasim (Karachi).

According to a press release, Pakistan’s Ambassador to the Russian Federation, Shafqat Ali Khan, signed the protocol to the IGA along with Nikolai Shulginov, Minister for Energy, Russian Federation, in Moscow.

The project has been renamed as Pakistan Stream Gas Pipeline (SPV) and is to be set up within 60 days of signing, as part of the agreement.

“The IGA has been updated as a protocol to reflect the utilization of GIDC and continued partnership with Russia to build the project. This has happened after successful negotiations conducted between Pakistan’s Ministry of Energy (Petroleum Division) and Russian Ministry of Energy,” a statement from the Ministry of Energy said.

According to Pakistani officials, the project is expected to cost around $2.25 billion.

“Under the revised IGA, Pakistan will be having the major shareholding with 74 percent stakes in the pipeline of 1,122 kilometers from Karachi (Port Qasim) to Kasur (Punjab). And Russia will have 26 percent equity,” a senior official from Pakistan’s energy Ministry told The News.

According to Bloomberg, Pakistan will have a majority share of 51% to 74% in the project, while Russia will own the rest.

“Once the amended agreement is signed, both sides will have to sign within 60 days the shareholding agreement, heads of the agreement under various commercial arrangements, and a Special Purpose Vehicle (SPV) company will also be constituted that will materialize the project,” The News reported.

Pakistan and Russia signed an agreement to build the North-South gas pipeline in 2015. According to the agreement, Russia was to finance 85 percent of the pipeline project, The News reported. The pipeline was to be developed on the build, own, operate, and transfer (BOOT) model whereby Russia had to transfer the project ownership to Pakistan after 25 years of its commissioning.

The project has barely moved since 2015 largely due to disagreements over fees and US sanctions against Russian state conglomerate Rostec.

The US has imposed sanctions on numerous Russian entities over the 2014 annexation of the Crimea Peninsula from Ukraine.