FO has ‘no objection’ to LPG deal with Russia firm

Govt giving priority to deals with Moscow despite US sanctions

Zafar Bhutta January 24, 2017
Prime Minister Nawaz Sharif with Russian President Vladimir Putin. PHOTO: AFP

ISLAMABAD: In a major indication of Pakistan’s foreign policy shift and emerging regional alignments, the Foreign Office has informed the federal cabinet that it has ‘no objection’ to an agreement between Pakistani and Russian firms for provision of LPG air-mix plants.

Islamabad and Moscow, bitter rivals of the Cold War era have agreed to deepen cooperation in the energy sector and will jointly set up LPG air-mix plants in Pakistan in an effort to tackle a chronic energy crisis in the country.

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Islamabad has started giving priority to deals with Russia despite the fact that there are US sanctions on the Russian firm nominated to implement the projects in Pakistan.

For establishing the LPG air-mix plants, Moscow has nominated RusGaz Engineering. Earlier, Russia had nominated RT Global to lay the LPG pipeline in Pakistan but the United States imposed sanctions on this entity which caused a delay in implementing this project.

The two countries are now working closely and have signed a government-to-government agreement for laying the North-South pipeline from Lahore to Karachi for LPG supply. But a commercial agreement has not yet been inked.

The Foreign Office informed the federal cabinet in its Dec 15 meeting that it had ‘no objection’ to the agreement from a ‘political point of view’.

The cabinet was told that during a recent visit of Petroleum Minister Shahid Khaqan Abbasi to Moscow, the Russian minister for energy had shared an approved draft of government-to-government agreement for setting up the LPG air-mix plants on an engineering procurement, construction and finance (EPC-F) basis.

The major part of the LPG air-mix plants would be funded by the Russian side against the sovereign guarantees of the government of Pakistan on the EPC-F basis. The nominated companies from Russia and Pakistan would be Rus-Gaz Engineering and Inter-States Gas Systems Limited (ISGL) respectively.

The cabinet was also informed that approval of Prime Minister Nawaz Sharif was sought for initiating negotiations on the inter-governmental agreement and the PM office had directed to place the matter before the cabinet as a priority agenda item.

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The approval of the cabinet was sought for initiating negotiations on inter-governmental agreement between Russia’s Ministry of Energy and Pakistan’s Petroleum Ministry for setting up LPG air-mix plants.

Pakistan’s state-run gas utilities have a huge pipeline network to provide locally produced natural gas to consumers across the country, but they fall way short of meeting the growing demand. The LPG air-mix plants will discourage the laying of new pipelines. Already, Sui Southern Gas Company (SSGC) has set up LPG air-mix plants in Balochistan.

Published in The Express Tribune, January 24th, 2017.


Ahmar Khan | 7 years ago | Reply A very good move. Russia is a much more reliable and politically stable country than USA. I am really happy to hear that our leaders have decided to show some sense even if it took them 60 years to get there.
Xnain | 7 years ago | Reply @Munir Akram: Its about funding, Russian funding would be routed through China since the sanctions on Russia are imposed in individual capacity by US and Europe. If Russians can fund the projects, they can do so by routing the finances through Shanghai. Iran can't fund the project on her own and Chinese are not willing to irk the American by allowing their door. China's interests with Russia are far bigger than those with Iran.
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