Pakistan and Russia have not yet decided many important financial components of the $2 billion government-to-government deal signed on 16 October to lay an LNG pipeline from Karachi to Lahore including tolling fee and capacity charge, informed sources told Business Recorder. According to a senior official of the Petroleum Ministry associated with handling of the project, the two countries will finalise all the remaining issues within the next few months.
He added the pipeline would be laid on Build, Operate and Transfer (BOT) basis. The Russian company would transfer it to Pakistan after 25 years. As per agreement, Pakistan will provide 15 percent equity, whereas 85 percent funding will be provided by the Russian firm.
The official said that Pakistan has formally invited Russian President Vladimir Putin to visit Pakistan for the groundbreaking ceremony and the Russian energy minister has confirmed Putin's visit. "Putin is likely to visit Pakistan in February 2016 to perform the groundbreaking of the pipeline project, for which Prime Minister Nawaz Sharif had handed over the framework to the Russian President in Ufa earlier this year," the official added.
The financing for the LNG pipeline comes as a prelude to Russia's offer to sell LNG to Pakistan. Russia is the second-largest producer of natural gas in the world, and is seeking to diversify its export markets after its "annexation" of Crimea last year and the ongoing insurgency in Ukraine.
According to a senior official of the Inter State Gas Systems (ISGS), the government is seeking to sign the commercial agreement in the next three to four months, adding that a bid document was being prepared by ISGS which would be handed over to the Russian firm. Russian firm RT Global Resources will lay the 1,100-km-long pipeline with a capacity of 12.4 Billion Cubic Metres (bcm) per annum to supply the commodity from LNG termini in Karachi to Sui-Northern Gas Pipelines Limited's (SNGPL) network in Lahore.
Pakistan is also working on a similar model with China, under which a Chinese firm would lay Gwadar to Nawabshah 700kilometers long LNG pipeline and build LNG termini with a capacity to handle 12.4 Bcm of imported gas at a cost of $2.5 billion. The Gwadar-Nawabshah pipeline would also be utilised to transport gas under the Iran-Pakistan Pipeline project, after adding 70km pipeline to connect it with the Iranian side of already laid pipeline.
The pipeline will be built in two phases; the first phase of the project will be completed by December 2017 and the second phase in 2018, with a total investment of $2 billion. The North-South gas pipeline project would be built by Russian company RT Global Resources - a part of Russian state corporation Rostec.
The government of Pakistan constructed the first LNG terminal at Port Qasim Karachi with a capacity to handle up to 600 Million Cubic Feet per Day (MMCFD) of LNG, while another terminal will be completed by 2017 with a capacity to handle 500 MMCFD of LNG. The objective of these termini is to deal with the severe gas shortage in the country. Total gas demand in Pakistan stands at 8 BCFD against total demand of 4 BCFD. The government is managing the gas supply to different sectors through a gas load-management plan, according to which in winter gas supply to industrial, fertiliser and CNG outlets remains suspended in Punjab, while in Sindh 3 days-a-week gas is being supplied to industrial and CNG outlets.
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