In a strategic move, the government has decided to construct a liquefied natural gas (LNG) terminal at Gwadar that is likely to be financed by China and a dual-purpose pipeline to cater to the needs of LNG and natural gas import from Iran.
The Economic Coordination Committee (ECC) of the cabinet, in a meeting held here on Thursday with Finance Minister Ishaq Dar in the chair, gave the go-ahead to the Gwadar-Nawabshah LNG terminal and pipeline project, according to a press release issued by the Ministry of Finance.
Though the government has not yet disclosed the cost of the project, it is estimated that it will need a minimum capital injection of $3 billion.
Under the plan, a pipeline network spread over 711 kilometres will be laid from Gwadar to Nawabshah. The diameter of the pipeline will be 42 inches, the same as that specified for the Iran-Pakistan (IP) gas pipeline.
The IP project has dragged on for years because of sanctions imposed by the European Union and United States on Iran.
If the project is executed, the Gwadar-Nawabshah pipeline could be extended by 71 km to the Iranian border for transporting gas, according to officials of the Ministry of Petroleum and Natural Resources.
They said the government had informed Iran about its intention of laying the 711km pipeline from Gwadar to Nawabshah as part of the LNG import project.
Officials express the hope the LNG project may help stave off penalties that Iran could slap on Pakistan for failure to meet the deadline for laying the IP pipeline by the end of this year.
The LNG terminal would be used to import and handle up to 500 million cubic feet of gas per day, said the finance ministry. The ECC has tasked Interstate Gas Systems (ISGS) with executing the plan.
The government has kept the option of competitive bidding open but in all likelihood the project will be funded by China as part of its heavy investment programme in return for seeking access to the Gwadar Port, according to officials.
“The finance minister advised the Ministry of Petroleum and Natural Resources to finalise the funding plan preferably on a government-to-government basis or build-operate-transfer or build-operate-own basis,” said the press release.
According to unofficial preliminary estimates, the pipeline will require $1 billion and over $2 billion will be needed to construct the terminal with LNG handling and re-gasification facilities and to install large storage facilities.
This will be the second LNG terminal as the first fast-track terminal is being constructed by Elengy Terminal Pakistan Limited, a wholly owned subsidiary of Engro Corporation, at the Port Qasim, which is scheduled to be completed by March 31, 2015.
Pakistan has not yet finalised LNG procurement arrangements and is considering both options for the Port Qasim project.
Cotton support price
The ECC also approved the support price for grade-three cotton at Rs3,000 per 40 kg aimed at shielding farmers from further losses. Raw cotton is being sold at around Rs2,300 per 40 kg, a price that is even lower than the cost of production, according to officials of the Ministry of National Food Security and Research.
The Trading Corporation of Pakistan (TCP) will purchase one million bales of cotton at the support price.
The finance minister said the government was aware that recent floods had badly affected a large part of the agriculture sector. “We are cognisant of the difficulties faced by our farmers and we will fully support them in this hour of need.”
The ECC also endorsed a proposal framed to determine the status of machinery, equipment and other capital goods’ manufacturing in the energy sector. It decided to facilitate local manufacturers and provide them a level playing field.
A working committee will be constituted by the Federal Board of Revenue to review whether appropriate incentives can be offered to the manufacturers to address their grievances and enhance competitiveness for higher domestic and export sales.
Published in The Express Tribune, October 3rd, 2014.
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COMMENTS (3)
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How about finishing and paying for the first one before starting the second? You have been talking about an LNG terminal for years and still haven't started building anything. Approving a new terminal is the std political maneuver creating the image of progress rather than taking practical moves which will actually provide energy to Pakistan.
Good step.
good move!