Pakistan, Russia agree to extend validity of $2 billion deal

Understanding between two sides was going to expire today

ISLAMABAD: Pakistan has extended the validity period of a $2-billion deal for the North-South gas pipeline which will be laid by Russia under a government-to-government arrangement.

Earlier, the two governments signed an understanding in October 2015 for building the North-South pipeline that would transmit imported liquefied natural gas (LNG) from Karachi to Lahore to satisfy fuel demand of some power plants.

However, the understanding was set to expire on Tuesday (October 16, 2018). Pakistan extended the deal during the current visit of a Russian delegation, which had arrived to finalise a commercial deal for the project.

Russia has designated state-owned RT Global Resources for project execution and it was required to sign a commercial agreement with Pakistan’s Inter State Gas Systems (ISGS).



Moscow agreed to lend $2 billion to Islamabad, which, in turn, would award the pipeline-laying contract to RT Global Resources without inviting any bids. Under the agreement, Pakistan was supposed to contribute 15% of equity while 85% funding would be provided by the Russian company.

The pipeline will be laid on the build, operate and transfer (BOT) model. Pakistan will gain control of it after 25 years. At present, the two sides are discussing legal and commercial aspects of the BOT model.



Moscow had demanded $1.2 per unit for gas transmission. However, a negotiating committee, set up with approval of the Economic Coordination Committee (ECC), brought the rate down to $0.78 per mmbtu during talks. Pakistan wanted a further cut in the rate.

Published in The Express Tribune, October 16^th, 2018.

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