Pakistan Reaches Agreement With Russia On Gas pipeline

After 4 days of negotiations, a ‘Head of Terms’ agreement was reached between Pakistan and Russia for the construction of the Pak Stream Gas Pipeline under which an 1100 km long gas pipeline would be laid from the Port Qasim area of ​​Karachi to Lahore. It will cost  $2.5 billion to $3 billion and will be completed in 2023.

According to details, the agreement was signed by Secretary of Petroleum Dr Arshad Mehmood and Deputy Director of the Ministry of Energy of Russia Alexander Tolparov, Barrister Asghar Khan of the Lincoln Law Chamber and Zaheer Riaz of Ardgnum provided legal assistance to the Russian and Pakistani teams, respectively.

The two sides also signed minutes of the Russia-Pakistan Joint Technical Committee (JTC) third meeting to implement the Pak Stream Gas Pipeline Project, commonly known as the North-South Gas Project.

Both sides agreed to a 74:26 per cent shareholding in the project, with Russia having the option to increase its shareholding to 49 per cent or withdraw from the project at any time.

In addition to the 18% rate of foreign exchange return, the two sides agreed on a price-based approach to revenue.

Russia will arrange to fund imported goods such as steel, consultancy, pipelines and other related equipment not available in Pakistan. The concession agreement for the pipeline will be effective for 25-30 years.

It does not guarantee any amount of gas, but payments and returns to Russian companies/consortiums should be ensured through routine security package and standby credit for international investors, including independent power producers.

The size of the pipeline is 56 inches to meet the country’s energy needs for the next 30 to 40 years, ensuring 700 to 800 million cubic feet per day (MMFCD) of gas supply. Which can be compressed to 2,000 MMCFD.

The arrangement will help the two Sui gas companies improve their capabilities to operate the 56-inch pipeline and compete for similar international projects. Post-construction work and maintenance of the project will be the responsibility of the needle companies which will receive training abroad during the construction period.

The next step will be the signing of a shareholders’ agreement, a financial agreement, a gas transportation agreement and a lender’s agreement, during which the Russian Front and Engineering Design (FEED) will complete and Pakistan Gas Infrastructure Development Cess and will arrange $321 billion in financing.

Both sides pledged to expedite the implementation of the plan to meet Pakistan’s emerging energy security scenario to ensure investment commitments through LNG terminals.

The two sides agreed to hold a joint technical meeting of the designated bodies within 30 days to exchange information on the status of the implementation of the project.