Pakistan mulls funding options to kick off PSGP

Considers borrowing from foreign creditors to ease burden on reserves


Zafar Bhutta August 21, 2021
PHOTO: REUTERS

ISLAMABAD:

Pakistan is considering different options for arranging foreign exchange from global creditors to ease the burden on country’s foreign currency reserves and kick off work on the $2.5 billion Pakistan Stream Gas Pipeline (PSGP) project.

A meeting of the Cabinet Committee on Energy (CCOE) was held under the chairmanship of Federal Minister for Planning, Development and Special Initiatives Asad Umar on Friday.

Sources told The Express Tribune that CCOE was informed that the Petroleum Division was working on different options to arrange the funding.

The Petroleum Division said that different options were on the table to arrange dollars.

The government may arrange dollars from a consortium, supplier credit, Exim credit or through a bilateral arrangement with different countries to finance PSGP, sources said. Pakistan has 74% shareholding whereas Russia holds 26% share in the pipeline.

The cabinet body was told that Pakistan would invest the rupee component out of the collection of Gas Infrastructure Development Cess (GIDC). However, it needs to arrange dollars to avoid the burden on the country’s foreign exchange reserves.

The Petroleum Division presented an update on the project, which included details of shareholders agreement terms, funding arrangements, completion of technical studies and regulatory approvals. The CCOE directed the Petroleum Division to ensure timely completion of various actions so that delays could be avoided.

Officials said that technical teams of Pakistan and Russia were going to meet by the end of August to finalise technical issues of shareholding agreements.

They said that the gas pipeline was a strategic project which will help Pakistan to transfer technology to Sui companies - Sui Southern Gas Company and Sui Northern Gas Pipelines. Russia will build the gas pipeline of 56-inch diametre from Karachi to Lahore to transport imported gas.

Refinery policy

The Petroleum Division presented the draft Pakistan Oil Refinery Policy 2021 for approval of the committee. The proposed policy was discussed in detail.

The Petroleum Division submitted that the purpose of the policy was to attract investment in new deep-conversion refineries as well as for upgrading the existing refineries.

Members of the committee made a number of suggestions for the draft policy. It was decided that the Petroleum Division would deliberate on the suggestions and submit the draft policy again for consideration of the cabinet body in its next meeting.

Sources said that members of the cabinet committee were concerned about the incremental revenue. They raised questions over spending by oil refineries on the new and upgrade projects.

Officials said that the cabinet body sought a detailed briefing on the volume of incremental revenue collection, the mechanism and the share in spending by the refineries.

Net metering

The CCOE exempted small-scale renewable energy projects from the requirement of generation licence.

At present, the customers apply to power distribution companies for a generation licence and finally the National Electric Power Regulatory Authority (Nepra) grants the licence.

Renewable energy experts say the entire process of acquiring the generation licence takes around 100 days.

The CCOE approved the proposal of the Power Division for eliminating the need for generation licences for small-scale RE-based systems (up to 25kW) for net metering.

The measure will greatly facilitate the consumers who wish to install small-scale solar systems for their homes and businesses and avail the facility of net metering.

The Power Division briefed the committee on the issues hampering progress on the transmission line providing interconnection to the 660MW LEPCL Power Plant. The committee was informed that all the technical issues had been examined and resolved.

The committee noted that there were no restraining orders from any legal/regulatory forum regarding the execution of the project. The committee, therefore, directed that project activities be carried out without any delay.

Published in The Express Tribune, August 21st, 2021.

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