Chinese offer to finance whole $2b LNG project

Rs184b collected by govt to finance such schemes was spent on other projects

ISLAMABAD: It appears that the Rs184 billion the government had collected to finance gas infrastructure projects will never be used for their intended purpose, as Chinese have agreed to finance the whole LNG Gwadar terminal and pipeline project.

Originally, the Chinese side was to provide 85% of the financing for the $2 billion project while the remaining 15% ($300 million) was to come from Pakistan’s side. For that purpose, Gas Infrastructure Development Cess (GIDC) was to gather the needed funds for the project.



Under the cess, Rs184 billion was collected, which translates to around $1.8 billion, far exceeding the $0.3 billion needed to finance the project.

The Express Tribune previously reported how these funds had already been spent on projects like Metro and Orange Line, according to officials.

When the Chinese pressed, the finance ministry stalled. The reluctance to even release the token money for the project, gave away the truth: funds were no longer available.

After having weighed Pakistan’s inability to pay for the infrastructure project, the Chinese asked the government to apply for a loan - an expensive and burdensome alternative but better than nothing. But the government continued to drag its feet as it wanted to have Project Cycle-1 (PC-1) approved from the Planning Commission beforehand.

 



Left with no alternative and irked by government’s inability to even apply for a loan, the Chinese have agreed to finance 100% of the project, instead of the original 85%.

All the chain of events beggar the question, if Chinese were to indeed be allowed to finance the whole project, what of the Rs184 billion cess?

History

At a time when gas shortage was becoming less of a probable scenario and more of an imminent threat, Pakistan conceived Gwadar-Nawabshah pipeline dream.

It was originally proposed as an alternative to the Iran-Pakistan pipeline, since US sanctions on Tehran at the time meant Pakistan was to surrender its own energy interests.



The project is to be developed under a government-to-government agreement with the Chinese side responsible for project implementation alongside financing.

Published in The Express Tribune, May 14^th, 2016.

Correction: In an earlier version of the article, the amount collected to finance the project was stated as Rs183.86 billion. The error has been corrected and is regretted. 

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