North-South pipeline: Pakistan, Russia reach LNG price accord

Published: December 1, 2016
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ISLAMABAD: Pakistan and Russia have agreed on the price for the $2-billion North-South pipeline that will pump imported liquefied natural gas (LNG) from Karachi to Lahore to satisfy growing energy needs of Punjab. They will sign a commercial contract soon.

“The Foreign Office played a key role in finalising the gas price with Russia ahead of Brics summit in October in order to muster Moscow’s support against Indian influence,” an official told The Express Tribune.

Pakistan, Russia meet today to discuss $2b LNG project

“India has abandoned Russia and gone into the US camp, prompting Pakistan to forge strong ties with Moscow for gaining vital support at the international level.”

In a major friendly gesture to Pakistan, Russian President Vladimir Putin has not endorsed Indian Prime Minister Narendra Modi’s stance accusing Islamabad of sponsoring terrorism.

According to officials aware of the development, the North-South pipeline will be the first major Russian investment in Pakistan after decades. Earlier, Russia had assisted Pakistan’s largest hydrocarbon explorer Oil and Gas Development Company (OGDC) in search for energy resources.

Before the agreement on LNG price, the Economic Coordination Committee (ECC) had approved the constitution of a price negotiating committee to finalise the multibillion-dollar gas import contract with Russia.

Russia is a big exporter of gas to Europe, but the US is lobbying to drive away Moscow from this market. Washington’s backing of the Turkmenistan, Afghanistan, Pakistan and India (Tapi) gas pipeline project is also part of that move to capture energy markets of Afghanistan, Pakistan and India.

Russia gets major supplies of gas from Turkmenistan and exports it to Europe.

“Russian investment in the LNG pipeline will open more avenues for investment in the energy sector,” the official said, adding it was also interested in oil and gas exploration in Pakistan.

Pakistan awards $2 billion LNG pipeline contract to sanction-hit Russian firm

Power production is another area where Moscow has expressed interest and it has even offered electricity export to Pakistan.

Russia will build the North-South gas pipeline and charge a tolling fee for LNG supply from Karachi to Lahore.

According to the official, it had demanded a fee of $1.2 per million British thermal units (mmbtu) for gas supply. However, the negotiating committee agreed on a fee of 85 cents per mmbtu.

“It is the ideal rate for gas transmission; Russia will pour capital to build the pipeline,” the official said.

At present, Pakistan is importing LNG from Qatar and local gas utilities are paid a total of 85 cents per mmbtu for gas transmission through their pipeline networks. The fee agreed with Russia is equal to the fee being charged by the gas utilities.

Earlier, Russian company RT Global, on which the US had imposed sanctions, was designated to implement the LNG pipeline project in Pakistan.

However, in a revised plan, Russia will get a special purpose vehicle registered in Pakistan. This will be a local company that will deal with the pipeline project.

The step has apparently been taken as a precaution, though the Ministry of Law is of the view that RT Global could work in Pakistan as companies facing US sanctions could not do transactions only with US financial institutions. They are not barred from working in other countries.

Published in The Express Tribune, December 1st, 2016.

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Reader Comments (7)

  • Sami Khan
    Dec 1, 2016 - 11:47AM

    Russian has history of brinkmanship. If Russian mood changes. it will block all gas, electricity and energy supplies. That is what Russia does with other countries. Russia did this with Europe, Turkey and other smaller countries. Russia even screwed India, its best ally, secretly. Pakistan must not depend on Russia. Understanding Russia is a mystery and no one ever was able to understand how Russian think. Russia is not as USA. both in good or bad way.Recommend

  • dhiti
    Dec 1, 2016 - 12:23PM

    Paying Russia to transport LNG within the country ? but why ?Recommend

  • Muzzammil
    Dec 1, 2016 - 12:46PM

    Contrary to the heading, the details report suggests that Pakistan-Russia accord is on pipeline tariff rather than LNG price.Recommend

  • Waseem Sarwar
    Dec 1, 2016 - 2:55PM

    @dhiti:
    Constructing a pipeline from Karachi to Lahore needs serious cash which Pakistani government don’t have so it’s better to see foreign investors investing money in Pakistan on reasonable terms. it also gives Pakistan assurances on security related threats from abroad. Recommend

  • Shuaib
    Dec 2, 2016 - 3:23AM

    @Sami Khan: Do you even know what the project is about?Recommend

  • Sami Khan
    Dec 2, 2016 - 8:56AM

    @Shuaib:
    define project? do you even know what is a project?Recommend

  • Imran
    Dec 2, 2016 - 6:07PM

    Good to hear that any country other than China is willing to invest in pakistan Recommend

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