In revised offer, China wants to work as construction contractor in Gwadar

Published: October 21, 2016
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A ship loads up with liquid natural gas, of which Qatar is the world's biggest exporter. PHOTO SOURCE: QATAR PETROLEUM

A ship loads up with liquid natural gas, of which Qatar is the world's biggest exporter. PHOTO SOURCE: QATAR PETROLEUM

ISLAMABAD: China has withdrawn its offer of setting up a liquefied natural gas (LNG) terminal at Gwadar Port on the build-and-operate model and now wants to work as an engineering, procurement and construction (EPC) contractor for the project.

“In response to the revision of offer by China, Pakistan will own and operate the terminal and award EPC contract to the Chinese company working on the Gwadar LNG pipeline project under a government-to-government arrangement,” an official told The Express Tribune.

Chinese offer to finance whole $2b LNG project

The government is also considering setting up two jetties at Gwadar Port with two floating LNG terminals at a cheaper cost for handling 1.2 billion cubic feet of imported gas per day (bcfd).

According to the official, a meeting of the price negotiation committee has already been held. The Exim Bank of China will provide financing at the rate of London Inter-bank Offered Rate (Libor) plus 2%.

During initial negotiations, the official said, it was discussed that tolling fee for the Gwadar LNG terminal would be 30 to 32 cents per million British thermal units (mmbtu) due to lower government profit.

Earlier, the lowest bidder for the second LNG terminal, to be set up at Port Qasim, had quoted a fee of 41.70 cents per mmbtu.

The Ministry of Petroleum and Natural Resources is working on the project plan for the Gwadar LNG terminal, which will be sent to the Planning Commission for approval.

According to the official, one more floating ship will be installed at Gwadar Port with 10% additional cost. It will help store LNG in case of congestion at Karachi Port.

China irked by delay in Gwadar project

The Executive Committee of National Economic Council (Ecnec) has given its approval for the Gwadar LNG pipeline, which will give a good signal to Iran, as Pakistan has planned to extend the pipeline by 80 km to connect it with the Iranian border.

The government is pushing ahead with this project as an alternative because of international sanctions on Iran in the past. The official pointed out that the government would be able to import 2.4 bcfd of LNG through the terminals at Karachi and Gwadar. This way, the entire deficit of 2.4 bcfd will be met.

At present, the country produces 4 bcfd of natural gas compared to demand for 6.4 bcfd.

One LNG terminal is already running at Port Qasim with a handling capacity of 600 million cubic feet per day (mmcfd). A contract for second terminal at the port, which will also have the 600-mmcfd capacity, has been awarded and work is going on.

Published in The Express Tribune, October 21st, 2016.

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Reader Comments (16)

  • vivek
    Oct 21, 2016 - 8:48AM

    Wat a sad news,Iran has completed the gas pipe line from it’s side just if Pak complete from it’s side,it will get cheapest gas than TAPI,now for China,how clever they are,they will bring their equipments, man power,raw materials and build then taking back 95% of the investment back to them selfs. Recommend

  • Haramullah Fattuddin
    Oct 21, 2016 - 9:20AM

    Whats wrong in this. China is giving a competition to the local contractor.
    Other than this China is more technologically advanced. It can do the things in more professional manner.Recommend

  • Ibrahim
    Oct 21, 2016 - 9:31AM

    You know, this isn’t actually a bad thing. Pakistan will actually own it completely, so any profit made will go to the government; it will also make repaying loans that have been taken, in the long run.

    I’m just wondering why China would go for such an obvious downgrade on its position.Recommend

  • Hmm
    Oct 21, 2016 - 9:48AM

    Masters are masters and slaves will be slaves.Recommend

  • Virkaul
    Oct 21, 2016 - 10:15AM

    Such decisions are prerorogative of the Owner and not contractor.

    China has burnt its hands in several power projects where red tapism, lack of transparency in costs and tariff resuits in operational difficulties. In LNG business, Chinese want to avoid these complicacies of buying gas and supplying at govt approved rates. They just want to have a large piece of cake from engineering fee and supply of equipment like vaporisers, Exchsngers etc.Recommend

  • raw is war
    Oct 21, 2016 - 1:04PM

    What will they demand – run Pakistan government?Recommend

  • Feroz
    Oct 21, 2016 - 1:35PM

    Since Chinese think this project is not financially viable they do not want to take the business risk. If this is the Chinese proposal to be the contractor, it must be ready to compete in an open tender with global competition. Of course the government cannot say we will spend our money only to protect the Chinese and no other company that wins the bidding process. It has to be a level playing field.Recommend

  • cautious
    Oct 21, 2016 - 2:11PM

    Pakistan doesn’t need another LNG terminal and this is just China transferring ownership risk back to Pakistan … as sole bid “construction contractor” China will insure it’s profit. Recommend

  • Sara
    Oct 21, 2016 - 3:07PM

    Is it American pressure? Why is China backing out?Recommend

  • Cosmo
    Oct 21, 2016 - 3:15PM

    @Haramullah Fattuddin:
    Did u not read “government-to-government arrangement” ? There is no competetion. Its China all the way!Recommend

  • سے Shaam (Hanafi)
    Oct 21, 2016 - 3:33PM

    It is very simple, Gwadar situated in Baluchistan has assumed international criticism due to atrocities in the region. China sensing trouble has moved out to play second fiddle fearing losses on account of international pressure.Recommend

  • avtar
    Oct 21, 2016 - 3:47PM

    The LNG terminals assume that Pakistan will continue to toe the line of KSA. If the relations between Iran and Pakistan thaw, a gas pipeline extension from Iranian border is going to be much cheaper. Same reasoning applies gas from Central Asian nations via Afghanistan. China ought to know this as well as the business analysts behind the economic case.Recommend

  • FAZ
    Oct 21, 2016 - 4:27PM

    @سے Shaam (Hanafi):
    Read the news again. Typical Indian attitude of being happy just by reading the headline (which is inconclusive and wrong). China has withdrawn from only LNG terminal and has decided to act as a contractor in “this project only”. The port is still operated by China and it will be a EPC contractor in LNG terminal project.
    Regrets for your aspirations!Recommend

  • genesis
    Oct 21, 2016 - 10:03PM

    Disillusionment with the whole project?Recommend

  • Truth Teller
    Oct 21, 2016 - 10:49PM

    It makes me happier to see indian on every article of CPEC. This shows how much they are worried about our CPEC project. They are very active on CPEC Project for a reason ;). Indians please stop worrying about Pakistan and start making toilets for your own people basic needs.Recommend

  • Xnain
    Nov 7, 2016 - 1:48PM

    Chinese embassy staff denies the story. Recommend

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