LNG supply: Pakistan seeks further fee cut for North-South pipeline

Makes request to Russia; two sides finalising terms and conditions of agreement

ISLAMABAD: Pakistan has asked Russia to make a further reduction in the tolling fee for pumping liquefied natural gas (LNG) through a planned $2 billion North-South pipeline that will bring energy for consumers in Punjab.

“Pakistan is seeking to further push down the fee to $0.78 per million British thermal units (mmbtu) in talks with Russia,” a senior government official said while talking to The Express Tribune.

Earlier, Moscow had demanded $1.2 per mmbtu for gas transmission. However, a negotiating committee, set up with approval of the Economic Coordination Committee (ECC), later agreed on 85 cents per unit.

At present, the two sides are finalising terms and conditions of a commercial agreement to pave the way for execution of the project.

“Pakistan and Russia have discussed parallel ways of implementing the project amid fears of sanctions on the Russian companies nominated to execute the project,” the official said. “After the two sides sign the commercial agreement, groundbreaking of the project will take place.”



Pakistan is eager to forge closer ties with Russia since Delhi has abandoned Moscow and has gone into the US camp.

“This pipeline, which will run from Karachi to Lahore, will bring the two countries closer,” the official remarked and called the North-South pipeline first major Russian investment in Pakistan after decades.

Pakistan will have to provide state guarantees to Russia in order to clear the way for laying the gas pipeline.

Earlier, Russia had assisted Pakistan’s largest hydrocarbon explorer, Oil and Gas Development Company (OGDC), in the search for energy resources.

Russian energy giant Gazprom and OGDC have also signed a memorandum of understanding for joint ventures in oil and gas exploration. This understanding will allow OGDC to undertake exploration activities in Russia whereas Gazprom will be able to look for hydrocarbons in Pakistan.

In addition to the gas pipeline, Pakistan also plans to import LNG from Russia in a government-to-government arrangement.

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

Russia gets major gas supplies from energy-rich Turkmenistan and exports to Europe.

However, casting aside the US pressure, Pakistan and Russia signed an inter-governmental agreement for LNG trade during the visit of a Russian delegation to Pakistan.



Pakistan is already importing LNG from Qatar under this model. The agreement will also allow Pakistan to import gas from Russia without inviting any bids.

“The pipeline deal with Russia is called ideal due to the lowest gas transmission price,” the official said.

Power production is another area where Moscow is interested in setting its footprint and has offered electricity export to Pakistan.

At present, Pakistan is importing LNG from Qatar under a 15-year agreement and local gas utilities are paid more than 85 cents per mmbtu for transmission through their pipeline networks.

Published in The Express Tribune, October 24^th, 2017.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.