Govt to provide guarantees for LNG pipeline financing

Gas utilities will raise Rs175 billion for laying Karachi-Lahore pipeline

Shahbaz Rana July 28, 2017
Transfer lines. PHOTO: REUTERS

ISLAMABAD: As the country’s gas reserves deplete, the federal government has agreed to provide guarantees for raising Rs175 billion for building a third liquefied natural gas (LNG) pipeline for the supply of imported gas to Punjab, which has been most affected by the declining reserves.

“Guarantees will be provided on the basis of strength of the gas infrastructure development cess (GIDC) funds,” said Shahid Khaqan Abbasi, Federal Minister for Petroleum and Natural Resources.

The minister was giving a briefing on Thursday to the Senate Standing Committee on Finance and Revenue on the GIDC utilisation plan.

Legislators belonging to Khyber-Pakhtunkhwa expressed reservations about the spending of most of the GIDC funds to meet energy needs of Punjab with LNG import.

Pakistan sees bigger LNG profile, imports to surge by 2022

Abbasi revealed that so far Rs258.8 billion had been collected in GIDC from various stakeholders including the receipt of Rs122 billion after the passage of GIDC Act in parliament in 2014.

Ministry of Petroleum and Natural Resources Joint Secretary Syed Tauqir told the standing committee a day earlier that the ministry had billed Rs414 billion on account of GIDC, but a significant part of it was stuck due to litigation.

The petroleum minister said the Ministry of Finance had given a plan for funding gas infrastructure projects worth Rs336 billion. Of this, the ministry will provide guarantees for raising Rs175 billion for the third LNG pipeline that will be laid by the country’s two gas utilities.

“Rs336 billion is available to the Ministry of Petroleum in one form or the other,” said Abbasi. However, actual spending out of the Rs258.8 billion GIDC collection was less than Rs500 million.

Sui Southern Gas Company (SSGC) has planned to build an LNG pipeline at an estimated cost of Rs64.9 billion from Karachi to Lahore, primarily to ensure gas supply. This project will be part of the third re-gasification (RLNG-III) project to be completed by the end of October 2018 as decided by the board of directors in a recent meeting

Abbasi said gas utilities laid the LNG-I pipeline with the help of their own resources, which was basically augmentation of the existing network. For the LNG-II pipeline, the finance ministry has already provided guarantees for raising Rs102 billion.

After the 18th Amendment to the Constitution, the first right of using gas has been given to the province where the energy is produced. This has led to huge energy shortages in Punjab, which the government tried to overcome by importing gas from abroad.

The petroleum minister insisted that LNG was the only solution to Pakistan’s energy woes and dismissed the impression that LNG imports were benefiting Punjab only. Power and fertiliser plants were being run with the help of LNG, he said.

The minister revealed that Rs30 billion from GIDC funds had been provided for installing liquefied petroleum gas (LPG) air-mix plants in four provinces.

Guarantees worth Rs20 billion have also been provided against the GIDC collection for the Turkmenistan, Afghanistan, Pakistan and India (Tapi) gas pipeline project.

Pakistan Tehreek-e-Insaf Senator Mohsin Aziz pointed out that GIDC had been levied only for laying the Iran-Pakistan (IP) and Tapi gas pipelines, adding LNG consumers were only in Punjab as Khyber-Pakhtunkhwa had surplus natural gas supplies.

Pakistan shelves $2b LNG project

The petroleum minister said Tapi gas would flow to Pakistan by mid-2020 and security of the gas pipeline would be the responsibility of Turkmenistan and Afghanistan. However, he said, work could not begin on the IP pipeline due to US sanctions against Tehran.

The government has also recently abandoned the $2-billion Gwadar-Nawabshah LNG terminal and pipeline project despite the signing of a framework agreement by Pakistan and China in April 2015.

Published in The Express Tribune, July 28th, 2017.

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