LNG supply: Gwadar terminal, pipeline project stuck on paper

File lands in one ministry after another; China waiting to kick off work

ISLAMABAD: Though more than one and a half year is gone, the $2-billion Gwadar-Nawabshah liquefied natural gas (LNG) terminal and pipeline project still remains on paper, upsetting China that has been waiting to kick off work on the scheme.

Of late, the Ministry of Petroleum and Natural Resources is also getting desperate and wants to ink a commercial agreement with China, an official says.

The project file is going from one ministry to another. The Economic Coordination Committee (ECC) of the cabinet has also not yet given the go-ahead to the commercial agreement, although the price negotiating committee finalised terms and conditions of it several months ago.



A framework agreement was signed between Pakistan and China on April 20, 2015 for developing the Gwadar-Nawabshah LNG terminal and pipeline project. Under the arrangement, China will provide 85% of financing whereas Pakistan will contribute 15% of equity.

Exim Bank of China will provide funds at London Interbank Offered Rate (Libor) plus 2%.

During initial negotiations, the official said, the tolling fee for the Gwadar LNG terminal was estimated at 30 to 32 cents per million British thermal units (mmbtu) because of lower government profit.

Now, a bidder for another LNG terminal has offered a tolling fee of 41.70 cents per mmbtu.



According to sources, the Ministry of Petroleum has been striving since the beginning to make the project part of the China-Pakistan Economic Corridor (CPEC), but all its attempts have gone in vain. Instead, the Lahore Orange Line Metro Train project has been included in CPEC.

“This shows government’s lack of attention towards strategically important projects like gas pipelines that will not only give a boost to economic activities and create hundreds of thousands of jobs, but will also provide an alternative way of LNG supply,” a senior government official commented.

“It is surprising that funds are available but the government seems to have lost interest in the project.”

The Gwadar LNG terminal and pipeline agreement, signed in April 2015, was originally valid for one year and its term expired on April 19, 2016. Pakistan and China, however, agreed to extend it for one more year till April 19, 2017.

The cabinet, in its meeting held in December last year, was apprised that the Law and Justice Division had recommended that ECC’s approval should be sought for extending the validity of the agreement, but it may be done only through an exchange of letters or single instrument.

In line with the advice, approval of the prime minister was solicited for extension in the framework agreement for one year through the exchange of instrument.

The premier, while giving his nod to the proposal, directed that the matter should be brought before the cabinet for ratification. Later, the cabinet gave its approval to the extension.

Published in The Express Tribune, February 15^th, 2017.

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