Pakistan, Russia to revise North-South pipeline deal

Discuss implementation of project by avoiding US sanctions

ISLAMABAD: Pakistan and Russia on Tuesday agreed to amend an inter-governmental agreement in a bid to execute a $2-billion gas pipeline project by avoiding US sanctions.

Earlier, the two sides had signed a government-to-government deal in October 2015 to construct the North-South liquefied natural gas (LNG) pipeline. Pakistan nominated Inter State Gas Systems (ISGS) whereas Russia designated RT Global for building the pipeline.

However, the project could not take off over the past few years as the US had slapped sanctions on RT Global.

Pakistan has continued to insist that Russia should provide a sanctions-free structure of its companies for implementing the project, which will take imported gas from Karachi to Lahore.

A Russian delegation, headed by Deputy Energy Minister Anatoli Tikhinov, held a meeting with Energy Minister Omar Ayub Khan and Special Assistant to Prime Minister on Petroleum Nadeem Babar on Tuesday.

The delegation is visiting Pakistan for the seventh Joint Cooperation Committee (JCC) session on the North-South gas pipeline.

Sources told The Express Tribune that both sides agreed to sign a protocol to amend the government-to-government agreement in an attempt to change the structure of Russian companies nominated by Moscow and avoid sanctions.

Earlier, Russian Energy Minister Alexander Novak had informed Pakistan about the replacement of the project company and assigning project implementation rights to North South Gas Pipeline (Private) Limited – a joint venture between the Eurasian Pipeline Consortium and Federal State Unitary Enterprise (FSUE) Centre of Operations Services of the Russian Ministry of Energy.

Pakistan has hailed the step taken by Russia, saying it is a major development that will pave the way for realisation of the North-South pipeline project. It has soothed the main concern of Pakistan that had been looking for a sanctions-free structure with pipeline building experience of the project implementing company.

Sources said under the amended protocol, a new structure of Russian companies proposed by Moscow would be incorporated into the agreement and would be signed within a month.

The two sides will also sign a build, own, operate and transfer (BOOT) contract in March and a price deal in April this year. Final agreement will be inked in July.

Moscow had demanded $1.2 per million British thermal units (mmbtu) in tolling fee for gas transmission. However, a negotiating committee, set up with approval of the Economic Coordination Committee (ECC) of the cabinet, later agreed on 85 cents per unit.

Pakistan asked Russia to further push down the fee to $0.78 per mmbtu during talks on the project but no progress could be made as work stalled due to the change in the structure of Russian companies several times.

According to a statement, while welcoming Anatoli Tikhinov, Omar Ayub stressed the need for making the North-South pipeline project transparent, financially viable and mutually beneficial for both Pakistan and Russia.

He termed the North-South pipeline a flagship project of cooperation between the two countries, particularly in the commercial and energy sphere.

Nadeem Babar gave an overview of Pakistan’s energy situation while highlighting the infrastructure projects the government planned to undertake to ensure oil and gas supply in the country.

He termed the North-South pipeline a stepping stone towards greater cooperation between Pakistan and Russia in the energy sector. He also welcomed Russian interest in the exploration and production sector of Pakistan including the planned auction of 18 blocks this month.

The special assistant emphasised the need for transparency and financial viability of the North-South pipeline and shared Prime Minister Imran Khan's desire to see successful execution of the project.

Russian deputy minister also termed the North-South pipeline an important milestone in bilateral relations between the two countries and highlighted Moscow’s desire to expand relations with Pakistan in all fields including energy.

He agreed that the project must be financially viable and benefit both the countries.