Pakistan, Russia cut deal on pipeline project

Islamabad and Moscow have struck a deal for the construction of the “PakStream Gas Pipeline” after “lengthy deliberations”.

“[The Govt of Pakistan and Russia have agreed upon and signed [the] 'Head of Terms' [of the project],” Federal Energy Minister Hammad Azhar tweeted on Thursday.

“Shareholding and corporate structure finalised. This project has been suffering from delays since 2015 but effective progress made today,” he added.

Also read: Pakistan, Russia sign amended gas pipeline deal

On Monday, a 12-member Russian delegation, headed by Department of Foreign Economic Cooperation and Fuel Markets Development Deputy Director AA Tolparov, arrived in Islamabad for talks on the project.

Russia nominated its official company Pakstream Limited, which negotiated with Pakistan's Inter State Gas System (ISGS) for the terms.

Both companies reached consensus on the “Heads of Terms” and on shareholding agreement with Pakistan’s share of 74% and Russian share of 26%.

The intergovernmental agreement (IGA) of the project was signed in 2015 but was not implemented. The project had been delayed since then as construction could not be initiated due to US sanctions on Russian firms.

Pakistan and Russia signed an amended IGA in May this year to start construction work on project.

Pakistan's Ambassador to Russian Federation Shafqat Ali Khan signed the Protocol to the IGA along with Russian Energy Minister Nikolai Shulginov.

The IGA was updated as a protocol to reflect the utilisation of Gas Infrastructure Development Cess (GIDC) and continued partnership with Russia to build the project.

This happened after successful negotiations conducted between Pakistan's Ministry of Energy (Petroleum Division) and the Russian Ministry of Energy.

The flagship Pakistan-Russia energy project will enhance bilateral cooperation in the hydrocarbon sector between both the countries and give huge technological uplift and employment opportunities to local companies in Pakistan.

The joint venture will execute the pipeline project from Karachi to Lahore to transport imported gas LNG. Pakistan has two LNG terminals with 1.2 billion cubic feet per day (bcfd) LNG import handling capacity. Private companies are also working to build two more LNG terminals in Pakistan.

A Russian firm will build the gas pipeline project from Karachi to Lahore with a capacity to transport two bcfd of gas.

The government wants to enhance this capacity to three bcfd in the next three years following increase in demand of local gas.

The present government has signed an LNG deal with Qatar to import 200 mmcfd of gas initially in the beginning of next year that would be enhanced to 400 mmcfd in the coming years. At present, Pakistan is importing 500 mmcfd of gas from Qatar.

Hence, Pakistan needs one more gas pipeline to transport this imported gas to Punjab province. However, despite this, the country has no legal framework to recover the price of imported gas from domestic consumers.