Chinese offer to finance whole $2b LNG project

Published: May 14, 2016
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Rs184b collected by govt to finance such schemes was spent on other projects. PHOTO: AFP

Rs184b collected by govt to finance such schemes was spent on other projects. PHOTO: AFP

Rs184b collected by govt to finance such schemes was spent on other projects. PHOTO: AFP 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. PHOTO: FILE

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.

Pakistan, China ink agreements worth $4.2b

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.

 

China irked by delay in Gwadar project

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.

China-funded LNG project to turn into Iran-Pakistan gas pipeline: petroleum minister

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 14th, 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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Reader Comments (22)

  • AJ
    May 14, 2016 - 9:02AM

    How is Rs.184 billion less than than $300 million?

    at current exchange rate it equals $1.75 billion or $1,750 billion or $1,750,000,000

    Quality of journalism is sub standard/Recommend

  • Rajesh
    May 14, 2016 - 9:12AM

    At what rate of interest?Recommend

  • May 14, 2016 - 10:50AM

    @AJ: The report says PRs.300/= billion and not $300/= billion.
    The question arises, where is the opposition on the application of the Gas Cess to Metro and Orange projects? With impunity these projects have been built and really it is easy to defalcate money in light projects, whereas, opposite is the case in infrastructure building. It is not an irony but high-class TREASON against the citizens.
    Where is Article 6 of the Constitution? Is it safely tucked away in IMF, WB, ADB pockets? Yes! Who will recover this money from the perpetrators who must be hastily put away, including the paindoo opposition. SalamsRecommend

  • Tyggar
    May 14, 2016 - 10:53AM

    China gives loans to Pakistan at 1.6-2% (http://tribune.com.pk/story/1096762/cpec-eastern-alignment-pakistan-china-ink-agreements-worth-4-2b/)

    In addition one of the main conditions is usually that Chinese companies are given contracts at rates quoted by them without a tendering process. Plus using Chinese labor which effectively means the money goes back to Chinese economy.

    Japan is financing India’s bullet train at 0.5% interest rate without any pre conditions on laborRecommend

  • Shabbir
    May 14, 2016 - 11:05AM

    Pakistan is rapidly moving towards becoming a Chinese vassal state.Recommend

  • Aziz
    May 14, 2016 - 11:06AM

    The money has surely been used to fund the offshore companies or provide funds for the grandiose “white-elephant” commission-rich projects making politicians rich beyond their own dreams.Recommend

  • observer
    May 14, 2016 - 11:11AM

    First parts of Northern Areas.

    Then GB.

    Then Gwadar.

    Then Baluchistan.

    Instead of piecemeal deals, can’t Pakistan enter into a wholesale deal with China?Recommend

  • Saljooq Altaf
    May 14, 2016 - 11:40AM

    @AJ:
    Thanks for your feedback, We’ll try to get the changes done asap :)Recommend

  • Saljooq Altaf
    May 14, 2016 - 11:49AM

    @Rajesh:
    Excellent question. Now usually these project would need some long term credit facility, it could be in the face of MTB, GIS and PIBs. Now the latest 12 month MTBs issued on May 12 went for 6.35%. Longer term credit would be more expensive, for instance May 12 Kibor data shows 3 year credit goes for 6.93% interest rate. I would imagine government would issue either a short-term cheap bond and roll-over its debt over time or a some-what expensive long-term bond (or Sukuk, whatever suits their fancy). Hope that answers your questionRecommend

  • wiserneighbour
    May 14, 2016 - 12:18PM

    Why dont china takeover pakistan.It is already spending so much money and sending so many labour,it is as good as another provence of china.But wait,the navy chief was talking about pakistan’s sovereignity.Recommend

  • May 14, 2016 - 12:56PM

    China is true friend of Pakistan.Recommend

  • AJ
    May 14, 2016 - 6:45PM

    @NKali

    Report say cost of the project is $2billion
    85% or $1.7billion or $1,700 millions is financed by China.

    Rest, 15%, or $0.3billion or $300 million is Pakistan responsibility.

    Report also states Pakistan govt collected RS. 184 billion which for some reason is less than $300 million. RS. 184 billion amounts to $1.75billion assuming a exchange rate of USD-PKR of 105

    Not sure how $1.75 billion is less than $300 million.

    Speaks about the lack basic education in the country. Recommend

  • karachi Wally
    May 14, 2016 - 9:28PM

    @Shabbir:

    You have to pay a price for saving of Masood Azhar by China in the UN.Recommend

  • Saeed Masood
    May 14, 2016 - 11:50PM

    Good news someone is investing in Pakistan…not like America not even fulfilling confirmed commitments…there is no doubt Pakistan has only one friend China…Recommend

  • IndianDude
    May 15, 2016 - 12:16AM

    ..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%…

    Goes to show who needs the CPEC badly. China is in dire need for CPEC. Pakistan has an upper hand in deal but advantage is being withered away because of incompetence, corruption or simply because Pakistan’s blinkered hate for India. Recommend

  • Al Furqan
    May 15, 2016 - 7:15AM

    So, Pakistan ends up funding,

    A. Sale of Chinese Goods

    B. At a price dictated by them

    C. For a project implemented by Chinese engineers and workers.

    D. And Three Tiered Security at the cost of Pakistani Taxpayers.

    E. And cede the area to Chinese control.

    Protecting Masood Azhar does not come cheap.Recommend

  • Faisal Afzal
    May 15, 2016 - 7:55AM

    @AJ:
    “Rs184 billion was collected, which translates to around $1.8 billion, far exceeding the $0.3”

    I’m not sure what you’re referring to.Recommend

  • Tp
    May 15, 2016 - 8:40AM

    Muslims wanted independence from India now they are becoming dependent on the Godless Chinese? Makes no sense at all.Recommend

  • Adnan Siddiqui
    May 15, 2016 - 8:43AM

    This is a marriage of convenience. There cannot be two states with more differing ideologies. One is an atheistic society that deals with Muslims with an iron fist. The other is a theocracy masquerading as a democracy populated by nearly 200 million Muslims. The two claim to be “sweeter than honey” friends. Go figure.Recommend

  • Sultan Durrani
    May 15, 2016 - 9:12AM

    Nation will have to trace this RS. 184 billion in offshore companies, because Orange train project is being completed with Chinese Loan.Recommend

  • Observer
    May 16, 2016 - 1:52PM

    @IndianDude:
    It was your hatred for Pakistan that brought you here (double-standard). Modi’s cabinet is full convicted criminals of murder and rape (more corruption in India than Pakistan – did you forget Anna Hazare?)Recommend

  • Observer
    May 16, 2016 - 2:00PM

    @Tp: Lot better than Hindus who are still lynching Muslims in India.Recommend

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