Ties triumph: Pakistan, Russia ink $1.7b energy deal

Under the agreement, Moscow will lay an LNG pipeline from Karachi to Lahore.

Zafar Bhutta December 22, 2014


Pakistan and Russia signed a most sought-after energy deal of $1.7 billion for laying a liquefied natural gas (LNG) pipeline from Karachi to Lahore. The supply of LNG is expected before March next year.

It is for the first time Islamabad and Moscow have signed an energy pact decades after their defence deal.

The energy agreement was signed during the visit of the Russian defence minister. Moreover, Islamabad and Moscow also signed a defence and military cooperation deal, a move seen by economic experts as ushering in a gradual improvement in ties between the two countries.

Before Gen Ziaul Haq’s military  regime, Russia had helped Pakistan set up the Karachi Steel Mills and also supported the Oil and Gas Development Company Limited, which is still using old Russian machinery in exploring oil and gas.

Pakistan is currently working on two LNG pipelines as an alternative to the apparently doomed Iran-Pakistan (IP) gas pipeline project, which included LNG Gwadar pipeline and south pipeline from Karachi to Lahore.

The government has signed a deal with China to award $3 billion Gwader LNG pipeline and terminal project.

Earlier, Pakistan had offered China and Russia to lay IP gas pipeline but both the countries had backed out due to sanctions imposed against Iran.

“However, the government has offered Moscow to sign a deal on government to government basis of $1.7 billion for laying LNG pipeline from Karachi to Lahore during the recent meeting of Pak-Russia Joint Ministerial Commission following a defence deal between the two countries,” sources said.

There was a good development between Islamabad and Moscow in the JC meeting to enhance bilateral energy cooperation, the sources maintained.

Officials pointed out that the pipeline would be used to transport imported LNG from Karachi to Punjab, adding that LNG terminal was in progress and first supply of LNG was expected before March next year.

At present, existing pipeline network has capacity of transporting 320 million cubic feet of gas per day (mmcfd) LNG and therefore the government was going to set up additional LNG pipeline.

The regulator Oil and Gas Regulatory Authority (Ogra) has already allowed gas utilities Sui Northern Gas Pipeline Limited (SNGPL) and Sui Southern Gas Company (SSGC) to generate funds from gas consumers to set up LNG pipeline.

SNGPL has planned to invest $750 million and SSGC $300 million to set up LNG pipeline. This pipeline was also likely to link with Gwadar LNG pipeline in future to pump gas from Iran and also LNG supply through a terminal to be set up at Gwadar.

Officials said that Pakistan had almost done a deal with China to lay Gwadar LNG pipeline which would be connected to Iran and south LNG pipeline from Karachi to Lahore had been offered to Russia.

The government of Pakistan was keen to award contract of south LNG pipeline to Russia on government to government basis which would create competition with China.

“The presence of two countries [Russia and China] in energy sector would open new avenues for attracting more investment,” sources maintained.

Published in The Express Tribune, December 23rd, 2014.