Upgrading gas pipelines: $1-b collection plan from consumers put on hold

Government delays move in wake of cases filed in courts.

ISLAMABAD:

The government has put on the back burner a plan of collecting about $1 billion (Rs101 billion) from gas consumers for financing the upgrading and expansion of the pipeline network in the wake of filing of different cases in courts.

According to officials of the Ministry of Water and Power, an improved gas pipeline network is aimed at supplying liquefied natural gas (LNG) to proposed power plants in Punjab.

However, cabinet members suggested in a meeting of the Cabinet Committee on Energy, held on April 8, that it was not possible to allocate Rs101 billion from the gas infrastructure development cess (GIDC) for augmenting the pipeline capacity as already a number of cases had been filed in courts against the imposition of GIDC.



The financing issue should be resolved in consultation with the stakeholders, they said.

However, they emphasised the importance of upgrading the pipelines to enable them to supply LNG to the power projects in Punjab. They said a capacity payment mechanism should be established to make it clearly known who would make the payment in the absence of gas supply.

Water and Power Secretary Younis Daga briefed the meeting about progress on setting up the power plants based on re-regasified LNG. The National Engineering Services of Pakistan (Nespak) has been engaged for preparing the project cycle (PC-1) and tender documents.

Already, preliminary studies of selected sites have been completed and the Punjab government has been asked to facilitate in land acquisition efforts.



“A management company and two special-purpose vehicles have been incorporated for the execution of the projects,” Daga said.

According to officials, the government is working on different gas pipeline capacity-enhancing projects including that of Sui Southern Gas Company (SSGC) whose 358-kilometre network of pipelines, with a diameter of 42 inches, will be completed by December 2016 at a cost of Rs44 billion.

Apart from SSGC that covers Sindh and Balochistan regions, Sui Northern Gas Pipelines Limited (SNGPL) is laying a 762km pipeline network at a cost of Rs57 billion.

A south-north gas pipeline spread over 1,100 km will be completed by March 2017 at a cost of $2 billion. In this regard, Pakistan and Russia have finalised a $2-billion energy deal for laying the LNG pipeline from Karachi to Lahore that will be signed next month in a government-to-government arrangement.

In addition to the $2 billion financing for the pipeline, which will transport the LNG imported from Qatar and other countries, Russia has agreed to help Pakistan bring LNG this year in a bid to overcome energy shortages.

Earlier, Islamabad and Moscow had inked an initial agreement in the form of a protocol that the two sides finalised in recent talks in Moscow. Pakistan will award the pipeline-laying contract to Russia without bidding in return for the provision of funds.

Separately, the government has signed an initial deal with China for awarding a $3-billion Gwadar LNG pipeline and terminal project to Beijing. This pipeline, which will also be connected to Iran, will transport imported LNG from Karachi to the cities in Punjab.

Already an LNG terminal is working in Karachi and it has handled the first gas consignment brought by the private sector.

At present, the pipeline network has the capacity to handle 320 million cubic feet of LNG per day (mmcfd), forcing the government to lay additional pipelines.

Published in The Express Tribune, April 29^th, 2015.

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