North-South pipeline: Pakistan, Russia reach LNG price accord

[ghazi52]

North-South pipeline: Pakistan, Russia reach LNG price accord

ISLAMABAD: Pakistan and Russia have agreed on the price for the $2-billion North-South pipeline that will pump imported liquefied natural gas (LNG) from Karachi to Lahore to satisfy growing energy needs of Punjab. They will sign a commercial contract soon.

“The Foreign Office played a key role in finalising the gas price with Russia ahead of Brics summit in October in order to muster Moscow’s support against Indian influence,” an official told The Express Tribune.

“India has abandoned Russia and gone into the US camp, prompting Pakistan to forge strong ties with Moscow for gaining vital support at the international level.”

In a major friendly gesture to Pakistan, Russian President Vladimir Putin has not endorsed Indian Prime Minister Narendra Modi’s stance accusing Islamabad of sponsoring terrorism.

According to officials aware of the development, the North-South pipeline will be the first major Russian investment in Pakistan after decades. Earlier, Russia had assisted Pakistan’s largest hydrocarbon explorer Oil and Gas Development Company (OGDC) in search for energy resources.

Before the agreement on LNG price, the Economic Coordination Committee (ECC) had approved the constitution of a price negotiating committee to finalise the multibillion-dollar gas import contract with Russia.

Russia is a big exporter of gas to Europe, but the US is lobbying to drive away Moscow from this market. Washington’s backing of the Turkmenistan, Afghanistan, Pakistan and India (Tapi) gas pipeline project is also part of that move to capture energy markets of Afghanistan, Pakistan and India.

Russia gets major supplies of gas from Turkmenistan and exports it to Europe.

“Russian investment in the LNG pipeline will open more avenues for investment in the energy sector,” the official said, adding it was also interested in oil and gas exploration in Pakistan.

Power production is another area where Moscow has expressed interest and it has even offered electricity export to Pakistan.

Russia will build the North-South gas pipeline and charge a tolling fee for LNG supply from Karachi to Lahore.

According to the official, it had demanded a fee of $1.2 per million British thermal units (mmbtu) for gas supply. However, the negotiating committee agreed on a fee of 85 cents per mmbtu.

“It is the ideal rate for gas transmission; Russia will pour capital to build the pipeline,” the official said.

At present, Pakistan is importing LNG from Qatar and local gas utilities are paid a total of 85 cents per mmbtu for gas transmission through their pipeline networks. The fee agreed with Russia is equal to the fee being charged by the gas utilities.

Earlier, Russian company RT Global, on which the US had imposed sanctions, was designated to implement the LNG pipeline project in Pakistan.

However, in a revised plan, Russia will get a special purpose vehicle registered in Pakistan. This will be a local company that will deal with the pipeline project.

The step has apparently been taken as a precaution, though the Ministry of Law is of the view that RT Global could work in Pakistan as companies facing US sanctions could not do transactions only with US financial institutions. They are not barred from working in other countries.

 

[ghazi52]

$2 billion North-South RLNG pipeline: Pakistan, Russia finalise BOOT agreement

ISLAMABAD: Pakistan and Russia have finalised the BOOT (build, own, operate and transfer) agreement for laying down $2 billion North-South RLNG pipeline from Nawabshah to Lahore. The draft agreement has been handed over to respective legal teams for converting it into legal language.

A pipeline of 300 kilometers will also be laid down from Karachi to Nawabshah if the need be. Under the BOOT deal, both sides have finalised the payment and invoicing mechanism and reached agreement on operational and termination mechanism.

During the four-day talks, Pakistan was represented by the Inter-State Gas System (ISGS) and Russia by the RT Global.

The talks got underway in Islamabad from October 15 and ended on October 18.

According to the Inter-State Gas System MD Mobin Saulat, the BOOT agreement had been finalised and its draft handed over to the legal team.

The Russian company will hand the project over to Pakistan after 25 years, as it will be executed under the BOOT arrangement.

Asked about the project cost and its transportation fee, Saulat said both side had just completed and finalised the agreement.

He said for Russia will send its commercial team to hold talks with the Price Negotiating Committee (PNC) for the project cost and transportation fee which was already in place.

Saulat said Pakistan direly needed this project to get RLNG that will be injected through private to private model LNG terminals. Three terminals are being planned to be set up in Port Qasim, he said.

Pakistan’s two LNG terminals are currently equipped with the off-take guarantee of 1.2 bcfd regasified LNG from the government of Pakistan. However, three private-to-private model based LNG terminals are also in pipeline, which may be operational by 2020.

And on top of that, (Turkmenistan-Afghanistan-Pakistan –India) TAPI is also re-scheduled to be operational by 2020.

Under this project, Pakistan will be importing 1.3 bcfd gas. The main problem will be how to evacuate the gas to various parts of the country and for this purpose both Pakistan and Russia will give the final shape to the BOOT agreement for laying down the much-needed N-S pipeline. The pipeline with diameter of 42 inch will have the capacity to evacuate 1.2 bcfd gas. Asked if the RT Global had come up with a sanctions-free structure during the talks which was inevitable to ensure a smooth sailing of the project, Saulat said the Russians did not bring a sanctions-free structure; however, the had assured that they will send its plan to this effect in two weeks and this would be taken up ministry to ministry level.

Both sides have done maximum work in the last two years towards the agreement but the main stumbling block in the project’s execution is the US sanctions on the Russian company.

ROSTEC, the mother company of the RT Global, is facing sanctions on account of Ukraine issue.

During the parleys starting from today (Monday) the RT Global will also come up with a sanctions-free structure to get the gas pipeline deal done.

Saulat said the Ministry of Defense had been asked to provide the RoW (right of way) for the pipeline project and expressed the hope that the NOC will soon be in possession.

 

[niaz]

Just to be clear the price of 85 cents per MMBtu quoted is the "Throughput" fee only. This does not include the price of gas itself.