LNG pipeline, terminal: Ministry approaches cabinet for contract approval

China will undertake work on the project, an alternative to IP pipeline.

ISLAMABAD:

In a bid to get approval for an initial deal signed with China for the award of a $3 billion liquefied natural gas (LNG) pipeline and terminal contract, the Ministry of Petroleum and Natural Resources has taken the matter to the cabinet, officials say.

The project, which will be developed in Gwadar, is being considered as a viable alternative to the stalled Iran-Pakistan (IP) gas pipeline.

Pakistan and Iran have already reached an understanding that they will implement the IP pipeline project under the alternative plan after US sanctions on Tehran are lifted.

The Interstate Gas Systems (ISGS), which deals with gas import projects including the IP pipeline, is finalising a deal with a Chinese company for the Gwadar project.

During Prime Minister Nawaz Sharif’s visit to China in November 2014, the Ministry of Petroleum and China National Petroleum Corporation signed a protocol to seal the understanding reached on awarding the LNG contract.



According to initial estimates, the cost of the project is expected to be $3 billion, of which $1 billion will be needed to lay the pipeline from Gwadar and over $2 billion will be required to construct the terminal with LNG handling and re-gasification facilities, in addition to developing large storages.

Under the protocol, China will meet 85% of the financing needs for constructing the LNG pipeline linking the Gwadar Port to Nawabshah and the terminal.

The Ministry of Petroleum is seeking the cabinet’s ex-post facto approval of the protocol to award the contract to the Chinese firm.

The Economic Coordination Committee (ECC) has already given, in principle, consent.

The Ministry of Petroleum has also sought from the cabinet relaxation in the Public Procurement Regulatory Authority (PPRA) rules for direct award of the contract to the Chinese firm.

This will be the second LNG terminal in the country as a fast-track terminal is already being built by Elengy Terminal Pakistan Limited (ETPL) at the Port Qasim, which is likely to be completed in February this year.

ETPL has been awarded the contract through competitive bidding and will start handling LNG imports in the shortest possible time.

The LNG pipeline starting from Gwadar will be extended to Iran for gas import when sanctions on Tehran are lifted.

The pipeline will have the same specifications that were proposed for the IP pipeline including a diameter of 42 inches.

According to officials, since Pakistan has not been able to lay a 781km pipeline from the Iranian border to Nawabshah because of dearth of foreign financing, it has decided to build the pipeline from Gwadar to Nawabshah in partnership with China.

Hopes were high as the US and Iran were engaged in crucial negotiations to settle the dispute over Tehran’s nuclear programme with a strong possibility that they would reach a compromise, officials say.

The economic decision-makers have already made up their mind that before the curbs are removed they will not push ahead with the gas pipeline project with Iran, in order to avoid its repercussions for Pakistani companies.

Published in The Express Tribune, January 31^st, 2015.

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