Pakistan’s $2 billion LNG pipeline project hits a snag

Published: January 14, 2016
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US slaps sanctions on Russian firm designated to work on scheme. PHOTO: FILE

US slaps sanctions on Russian firm designated to work on scheme. PHOTO: FILE

ISLAMABAD: 

Pakistan’s two-billion-dollar LNG pipeline project has hit a snag with Washington slapping a set of sanctions on the Russian firm designated to work on the scheme.

Earlier, Pakistan was unable to execute the Iran-Pakistan (IP) gas pipeline project because of sanctions slapped on Tehran by the United States and the European Union.

Karachi to Lahore pipeline: Pakistan, Russia seal $2 billion energy deal

The Russian government had signed a deal with the Pakistani administration to lay a $2bn North South Pipeline from Karachi to Lahore to transport imported LNG, nominating the firm RT Global Resources (RTGR) to execute the project. Russian President Vladimir Putin was to visit Pakistan to perform the ground-breaking ceremony of the project.

“Now we have found out that the US has imposed sanctions on RTGR, causing bottlenecks in executing the LNG pipeline project,” a Pakistani official said, adding that the US had also stopped Pakistan from executing the IP gas pipeline project.

After the latest development, Pakistan and Russia are facing an uncertain situation as regards awarding the contract to RTGR.

The two countries had signed a government-to-government deal, and RTGR and Pakistani firm Inter State Gas Systems were to sign a commercial agreement to execute the project.

LNG pipeline, terminal: Govt to decide on Chinese firm’s bid in a month

An official said the Russian government was evaluating the sanctions imposed on the Russian firm while Pakistan was yet to make a decision.

The two governments had signed a deal in October 2015 to construct a pipeline to transport liquefied natural gas from Karachi to Lahore.

Moscow had agreed to lend Islamabad $2 billion for the project. In return, Islamabad would award the contract of laying the pipeline to RTGR without holding a bidding process.

The firm, which is a Russian state corporation, would lay the 1,100km pipeline with a capacity of 12.4 billion cubic metres per annum to connect LNG terminals in Karachi with those in Lahore.

Pakistan has worked on a similar model with China under which a Chinese firm would lay an LNG pipeline from Gwadar to Nawabshah and build an LNG terminal at the deep-sea port at a cost of $2.5 billion.

Liquefied natural gas: Govt seeks to negotiate Gwadar pipeline cost

The financing for the LNG pipeline had come 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 was seeking to diversify its export markets after a spat over Ukraine with the EU, its main buyer.

The pipeline would be laid on the basis of build, operate and transfer. The Russian company would transfer it to Pakistan after 25 years.

Under the agreement, Pakistan would provide 15% equity while 85% funding would be provided by the Russian firm. The first phase of the project is expected to conclude by December 2017.

Published in The Express Tribune, January 14th, 2016.

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Reader Comments (13)

  • Strategic death
    Jan 14, 2016 - 10:29AM

    Why on earth Pakistani establishment are dealing with the firms from sanction hit countries like Iran, Russia? Recommend

  • Syed
    Jan 14, 2016 - 12:08PM

    Why US is sanctioning all companies which wanted to work with Pakistan?

    They have also stalled sale of F16

    Pakistani needs to reevaluate the relationship with US again.Recommend

  • Jahangir
    Jan 14, 2016 - 12:11PM

    @ Strategic death: My dear bcoz, on earth Russia & Iran are resource rich neighbouring countries of Pakistan and from where Pak can only get Gas/LNG through Pipeline.
    The Point is why on earth Pakistan affected from these sanctions imposed by USA? if Russia and Iran exporting to number of countries including EU why not Pak.
    The aim of sanctions could only be made for Pakistan, which USA don’t want to become energy efficient in number of ways.Recommend

  • Feedback
    Jan 14, 2016 - 12:33PM

    Who signed the deal with such firms like RTRG? Why there was no background check? $2 billion of our tax money is NOT a joke.Recommend

  • Faruk
    Jan 14, 2016 - 1:34PM

    I think it’s time we should reconsider our relations with USA, because of USA we are buying GAS from Qatar, because of USA we are going to bring GAS from Turkamstan and Electric from Tajikistan, you know why? our leaders Sharif & Zardari have big investments in west, for this reason they can not say no to USA. Now Russia can’t build a gas pipe line we can’t buy gas or Electric from Iran, because west has has put sanctions. Recommend

  • Parvez
    Jan 14, 2016 - 2:58PM

    Its time Pakistan realized who its friends are and who its enemies. Recommend

  • curious2
    Jan 14, 2016 - 5:16PM

    Why would anyone sign a “no bid” deal? The answer is obvious – your going to pay more than you should and politicians are going to get kickbacks. Recommend

  • Perturbed Citizen
    Jan 14, 2016 - 5:18PM

    If this information is correct, some heads must roll in the foreign office and energy ministries. PM’s whole energy plan is based on LNG pipelines for 3 large plants in Punjab.

    This is not first time. Agreeemnt with Iran was also siged in contovercial circumstances . Foreighn Minister gave incorrect advice and statement that US sanctions will not apply on Iran Gas Pipelines. In fact FM has said ‘ over our deadbodies’.

    If there is no capacity in the departments and mininitries concerned or there is lack of coordination or absence of any SOP, these must be put in place. It is national embarassmnet . There is no room for mercey or forgiveness. Recommend

  • Mesquiteice (@mesquiteice)
    Jan 14, 2016 - 5:23PM

    Pakistan has to buy yuan from china in return for dollars and pay russia in yuan. Simple. Sanctions are only for USD tradeRecommend

  • curious2
    Jan 14, 2016 - 5:30PM

    @Syed:

    Why US is sanctioning all companies
    which wanted to work with Pakistan?

    Sanctions were in place before Pakistan considered IP or Russian pipeline. BTW – there are plenty of qualified Companies who can build pipelines throughout the World – yet Pakistan continues to select China and Russia under “no bid” arrangement.
    ,
    Why is nobody concerned about a country with a reputation of corruption entering into “no bid” arrangements on major contracts? No editorials – not even dissent from minority political parties.Recommend

  • Malik Saab
    Jan 14, 2016 - 5:31PM

    @Strategic death: There were no sanctions on this company. As soon as America realized that this company is going to invest in Pakistan they slapped sanctions on it. America is now showing its true colors. It was and never will be the sincere of our country. Americans do not want our country to have energy independence at any cost. They want us to be dependent all the times. Recommend

  • curious2
    Jan 14, 2016 - 11:38PM

    @Malik Saab:

    As soon as America realized that this
    company is going to invest in Pakistan
    they slapped sanctions on it.

    That’s incorrect. Sanctions were placed prior to Pakistan having any conversations with Russia about pipelines. The sanctions were placed on Russia as a result of it’s invasion of Ukraine which resulted in the illegal seizure of Crimea. This company was part of the sanctions because it’s leader is an old KGB buddy of Putin and the sanctions were targeted at Putin’s inner core.Recommend

  • Ssgc Voice
    Jan 27, 2016 - 10:21AM

    Well done, Ssgc Voice congratulate to Shafi Saleem’s Fact-Finding reporting in which he Uncover Fake Appointment of Mr. Muhammad Asghar Sahto (Executive No. 9801, Grade-vii) as Dy. General Manager In Sui Southern Gas Company, but Instead of “EXPEL” him on using Illicit & illegal resources, he has been facilitated and Make “Head Of Civil Works Department”. We strongly condemned this illegal act and demand to “PROBE” in the case of his recruitment and if he find guilty as stated by Shafi Saleem in his Reporting than must be treated as per rules & regulations of “SERVICE RULES”.,
    HOPE THAT MANAGEMENT TAKES THIS MATTER SERIOUS AND TAKE ACTION AGAINST THIS UNLAWFUL ACT.Recommend

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