Pakistan Ka Beta
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Featured Pakistan and Russia signed the Agreement on North-South Pipeline Project
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Taimoor Khan
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Huge development!! Fantastic news.
Which Russian company building the pipeline? Gazprom?
Which Russian company building the pipeline? Gazprom?
Pakistan Ka Beta
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NIKOLAY SHULGINOV AND PAKISTANI AMBASSADOR TO THE RUSSIAN FEDERATION SHAFKAT ALI-KHAN SIGNED A PROTOCOL ON AMENDMENTS TO THE INTERGOVERNMENTAL AGREEMENT OF OCTOBER 16, 2015 ON THE CONSTRUCTION OF A GAS PIPELINE IN PAKISTAN
05/28/2021
Moscow, May 28. - Nikolay Shulginov and Pakistani Ambassador to the Russian Federation Shafkat Ali-Khan signed the Protocol on Amendments to the Intergovernmental Agreement on Cooperation in the Implementation of the North-South Gas Pipeline Construction Project dated October 16, 2015.
A gas pipeline with a length of over 1.1 thousand km and a throughput capacity of up to 12.3 billion cubic meters. m per year will connect terminals for receiving liquefied gas (LNG) in the ports of Karachi and Gwadar in the south of Pakistan with power plants and industrial consumers of gas in the Kasur district (Punjab) in the north of the country.
“The construction of the Pakistani Stream gas pipeline remains the flagship project of bilateral cooperation between Russia and Pakistan in the energy sector, both countries attach a high priority to the project. The relevant departments of our countries have done a lot of work on the preparation of this Protocol, its signing will allow our companies to begin practical implementation of the project in the very near future, thereby helping the Pakistani side to strengthen its own energy security and increase the use of natural gas as an environmentally friendly source of energy, " the results of signing Nikolay Shulginov.
ghazi52
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Make or break talks with Russia on PSGP from July 12
ISLAMABAD: In a new development, a 12-member Russian delegation, headed by A A Tolparov, Deputy Director of Department of Foreign Economic Cooperation and Fuel Markets Development, is coming on July 12 to Pakistan for having ‘make or break’ four-day talks on the country’s most strategic project of Pakistan Stream Gas Pipeline (PSGP), which is also known as the North South Gas Pipeline.
Both the countries inked on May 28 an amended Inter Governmental Agreement on PSGP in Moscow with the resolve to sign the shareholder agreement and other commercial accords within 60 days. The talks would focus on shareholders’ agreement and heads of terms. Both the countries would also decide about the diameter of the pipeline.
Pakistan’s powerful circles want the Russian Federation to develop its stakes in Pakistan’s economy through building the PSGP. Both the countries have already developed their relations to new heights in terms of cooperation in the defence sector. The Russian Federation has been on board with Pakistan since 2015 on the project. The project witnessed many upheavals, mainly because of demands of Pakistan, sometimes on companies’ structure for the project and sometimes on the financing issues.
Dr Arshad Mehmood, Secretary Petroleum, when contacted, confirmed that talks with Russia on the project were to start from Monday (July 12, 2021). He said: “We want Russian participation in the project but we will protect the country's interests in the talks.” He also said that authorities in Pakistan want the maximum benefit to local companies from spending on the project.
Mehmood hoped that talks with Russia would be successful but in case of any failure, authorities are working on a contingency plan also to develop an alternate pipeline.
According to the sources, under the earlier Inter-Governmental Agreement, Russia was to erect the whole project with its 100 percent financing. Then the Government of Pakistan took a new decision with maximum investment from its side on the project after the Supreme Court verdict on GIDC (Gas Infrastructure Development Cess). Now under the amended IGA, Pakistan will be having 74pc shares and Russia 26 percent in the project.
Russia has agreed to participate with 26 percent financing, showing how serious Moscow is to build its stakes in the Pakistan economy. Russia in the past built the Pakistan Steel Mills and OGDCL too.
After the decision of June 24, 2021 by the Cabinet Committee on Energy (CCOE), the Petroleum Division has started finalizing the alternate pipeline project plan, observing that PSGP will be further delayed, which has already missed the deadline given by the Supreme Court.
Tabish Gauhar, SAPM on Power and Petroleum, have already spoken his mind with The News and Geo in favour of an alternate pipeline in place of PSGP, arguing Russian conditions as a whole are very hard and in case talks with Russia fail, then both the gas companies — Sui Southern and Sui Northern will build the pipeline with the name of LNG-III pipeline.
Tabish is of the view that Pakistan needs the new pipeline from Karachi to Lahore in 2023 to cater to the LNG demands in Punjab and Northern Areas and both the companies are able to lay down the pipeline with 42 inches diameter with less cost than the PSGP cost.
Tabish also says that the government has plan A under which PSGP will be prioritized but if talks fail, then Pakistan under plan-B will not wait more and go for execution of an alternate pipeline. He also argued saying that Pakistan cannot extend any kind of sovereign guarantee to ensure the profits of 26 percent shares to the Russian side. In addition, sources say that Pakistan officials have also made up their mind not to even give the O&M contract to the Russian consortium.
The Russian Federation is reported to have shown concerns with the ambassador of Pakistan to Russia over media reports about the Petroleum Division’s working on the alternate pipeline project under the consortium of Sui Southern, Sui Northern and PAPCO – a company of PARCO. Pakistan’s ambassador, who is the signatory of amended IGA on behalf of the Government of Pakistan, sent a letter to the Foreign Office about the increasing concerns of the Russian Federation.
In an interaction with the ambassador, Russian authorities are reported to have said that Pakistan is a sovereign country and can build pipelines with the help of its own companies’ consortium and posed a question then why Pakistan has signed the amended IGA on May 28. The Foreign Office took the letter of its ambassador posted in Moscow very seriously and sent it to the Petroleum Division. The top sources say the Russian delegation is now coming for talks with the Make and Break mind. Pakistan’s ‘powerful circles’ want to make the pipeline transaction with Russia successful.
ISLAMABAD: In a new development, a 12-member Russian delegation, headed by A A Tolparov, Deputy Director of Department of Foreign Economic Cooperation and Fuel Markets Development, is coming on July 12 to Pakistan for having ‘make or break’ four-day talks on the country’s most strategic project of Pakistan Stream Gas Pipeline (PSGP), which is also known as the North South Gas Pipeline.
Both the countries inked on May 28 an amended Inter Governmental Agreement on PSGP in Moscow with the resolve to sign the shareholder agreement and other commercial accords within 60 days. The talks would focus on shareholders’ agreement and heads of terms. Both the countries would also decide about the diameter of the pipeline.
Pakistan’s powerful circles want the Russian Federation to develop its stakes in Pakistan’s economy through building the PSGP. Both the countries have already developed their relations to new heights in terms of cooperation in the defence sector. The Russian Federation has been on board with Pakistan since 2015 on the project. The project witnessed many upheavals, mainly because of demands of Pakistan, sometimes on companies’ structure for the project and sometimes on the financing issues.
Dr Arshad Mehmood, Secretary Petroleum, when contacted, confirmed that talks with Russia on the project were to start from Monday (July 12, 2021). He said: “We want Russian participation in the project but we will protect the country's interests in the talks.” He also said that authorities in Pakistan want the maximum benefit to local companies from spending on the project.
Mehmood hoped that talks with Russia would be successful but in case of any failure, authorities are working on a contingency plan also to develop an alternate pipeline.
According to the sources, under the earlier Inter-Governmental Agreement, Russia was to erect the whole project with its 100 percent financing. Then the Government of Pakistan took a new decision with maximum investment from its side on the project after the Supreme Court verdict on GIDC (Gas Infrastructure Development Cess). Now under the amended IGA, Pakistan will be having 74pc shares and Russia 26 percent in the project.
Russia has agreed to participate with 26 percent financing, showing how serious Moscow is to build its stakes in the Pakistan economy. Russia in the past built the Pakistan Steel Mills and OGDCL too.
After the decision of June 24, 2021 by the Cabinet Committee on Energy (CCOE), the Petroleum Division has started finalizing the alternate pipeline project plan, observing that PSGP will be further delayed, which has already missed the deadline given by the Supreme Court.
Tabish Gauhar, SAPM on Power and Petroleum, have already spoken his mind with The News and Geo in favour of an alternate pipeline in place of PSGP, arguing Russian conditions as a whole are very hard and in case talks with Russia fail, then both the gas companies — Sui Southern and Sui Northern will build the pipeline with the name of LNG-III pipeline.
Tabish is of the view that Pakistan needs the new pipeline from Karachi to Lahore in 2023 to cater to the LNG demands in Punjab and Northern Areas and both the companies are able to lay down the pipeline with 42 inches diameter with less cost than the PSGP cost.
Tabish also says that the government has plan A under which PSGP will be prioritized but if talks fail, then Pakistan under plan-B will not wait more and go for execution of an alternate pipeline. He also argued saying that Pakistan cannot extend any kind of sovereign guarantee to ensure the profits of 26 percent shares to the Russian side. In addition, sources say that Pakistan officials have also made up their mind not to even give the O&M contract to the Russian consortium.
The Russian Federation is reported to have shown concerns with the ambassador of Pakistan to Russia over media reports about the Petroleum Division’s working on the alternate pipeline project under the consortium of Sui Southern, Sui Northern and PAPCO – a company of PARCO. Pakistan’s ambassador, who is the signatory of amended IGA on behalf of the Government of Pakistan, sent a letter to the Foreign Office about the increasing concerns of the Russian Federation.
In an interaction with the ambassador, Russian authorities are reported to have said that Pakistan is a sovereign country and can build pipelines with the help of its own companies’ consortium and posed a question then why Pakistan has signed the amended IGA on May 28. The Foreign Office took the letter of its ambassador posted in Moscow very seriously and sent it to the Petroleum Division. The top sources say the Russian delegation is now coming for talks with the Make and Break mind. Pakistan’s ‘powerful circles’ want to make the pipeline transaction with Russia successful.
Titanium100
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Make or break talks with Russia on PSGP from July 12
ISLAMABAD: In a new development, a 12-member Russian delegation, headed by A A Tolparov, Deputy Director of Department of Foreign Economic Cooperation and Fuel Markets Development, is coming on July 12 to Pakistan for having ‘make or break’ four-day talks on the country’s most strategic project of Pakistan Stream Gas Pipeline (PSGP), which is also known as the North South Gas Pipeline.
Both the countries inked on May 28 an amended Inter Governmental Agreement on PSGP in Moscow with the resolve to sign the shareholder agreement and other commercial accords within 60 days. The talks would focus on shareholders’ agreement and heads of terms. Both the countries would also decide about the diameter of the pipeline.
Pakistan’s powerful circles want the Russian Federation to develop its stakes in Pakistan’s economy through building the PSGP. Both the countries have already developed their relations to new heights in terms of cooperation in the defence sector. The Russian Federation has been on board with Pakistan since 2015 on the project. The project witnessed many upheavals, mainly because of demands of Pakistan, sometimes on companies’ structure for the project and sometimes on the financing issues.
Dr Arshad Mehmood, Secretary Petroleum, when contacted, confirmed that talks with Russia on the project were to start from Monday (July 12, 2021). He said: “We want Russian participation in the project but we will protect the country's interests in the talks.” He also said that authorities in Pakistan want the maximum benefit to local companies from spending on the project.
Mehmood hoped that talks with Russia would be successful but in case of any failure, authorities are working on a contingency plan also to develop an alternate pipeline.
According to the sources, under the earlier Inter-Governmental Agreement, Russia was to erect the whole project with its 100 percent financing. Then the Government of Pakistan took a new decision with maximum investment from its side on the project after the Supreme Court verdict on GIDC (Gas Infrastructure Development Cess). Now under the amended IGA, Pakistan will be having 74pc shares and Russia 26 percent in the project.
Russia has agreed to participate with 26 percent financing, showing how serious Moscow is to build its stakes in the Pakistan economy. Russia in the past built the Pakistan Steel Mills and OGDCL too.
After the decision of June 24, 2021 by the Cabinet Committee on Energy (CCOE), the Petroleum Division has started finalizing the alternate pipeline project plan, observing that PSGP will be further delayed, which has already missed the deadline given by the Supreme Court.
Tabish Gauhar, SAPM on Power and Petroleum, have already spoken his mind with The News and Geo in favour of an alternate pipeline in place of PSGP, arguing Russian conditions as a whole are very hard and in case talks with Russia fail, then both the gas companies — Sui Southern and Sui Northern will build the pipeline with the name of LNG-III pipeline.
Tabish is of the view that Pakistan needs the new pipeline from Karachi to Lahore in 2023 to cater to the LNG demands in Punjab and Northern Areas and both the companies are able to lay down the pipeline with 42 inches diameter with less cost than the PSGP cost.
Tabish also says that the government has plan A under which PSGP will be prioritized but if talks fail, then Pakistan under plan-B will not wait more and go for execution of an alternate pipeline. He also argued saying that Pakistan cannot extend any kind of sovereign guarantee to ensure the profits of 26 percent shares to the Russian side. In addition, sources say that Pakistan officials have also made up their mind not to even give the O&M contract to the Russian consortium.
The Russian Federation is reported to have shown concerns with the ambassador of Pakistan to Russia over media reports about the Petroleum Division’s working on the alternate pipeline project under the consortium of Sui Southern, Sui Northern and PAPCO – a company of PARCO. Pakistan’s ambassador, who is the signatory of amended IGA on behalf of the Government of Pakistan, sent a letter to the Foreign Office about the increasing concerns of the Russian Federation.
In an interaction with the ambassador, Russian authorities are reported to have said that Pakistan is a sovereign country and can build pipelines with the help of its own companies’ consortium and posed a question then why Pakistan has signed the amended IGA on May 28. The Foreign Office took the letter of its ambassador posted in Moscow very seriously and sent it to the Petroleum Division. The top sources say the Russian delegation is now coming for talks with the Make and Break mind. Pakistan’s ‘powerful circles’ want to make the pipeline transaction with Russia successful.
Where will this pipeline be build
ghazi52
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From Karachi ( Sea Port ) to Lahore ( Punjab )
1,100-km-long pipeline with a capacity of 12.4 billion cubic metres (bcm) per annum to connect LNG terminals in Karachi with those in Lahore.
It started ................................. October 17, 2015
Petroleum Minister Shahid Khaqan Abbasiand Russian Energy Minister Alexander Novak sign the agreement for a gas pipeline project in Islamabad. PHOTO: PID
ISLAMABAD: Pakistan and Russia signed a government-to-government deal on Friday to construct a pipeline to transport liquefied natural gas (LNG) from Karachi to Lahore. Moscow will lend Islamabad $2 billion for the project.
farok84
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Hi,
Although, a disappointing move, but I believe PTI is playing cheeky with Russians.
This RLNG III pipeline seems more of an afterthought for extracting further benefits from Russian side, specially during construction and operation (O&M) phases. Atleast, the IK supporter in me, wants to hope and believe this naive and simpleton notion, against the glaring idea of Tabish Gohar intentionally spoiling Russia-Pak ties. PTI did play this card brilliantly to some extent while negotiating its Lng contract, by involving SOCAR and others, and getting the lowest signed lng term contract to this date. Unfortunately, Russians are not naive and will regard this as a sabotaging act (with PARCO, comes in US/ Western EPC companies) and not a negotiation leverage, specially after them being extremely accommodating from ammending 2015's agreement from BOOT to 2021's 74-26% profit sharing mechanism with them being junior partners, to limiting rather completely sidelining any US sanctioned companies like Gazprom - traditionally all these "Streams" are constructed by Gazprom. They have a just reason to be frustrated.
On other hand, Pakistan is more than capable to handle this project on its own, and I would have advocated for Descon or any other local EPC companies for it, if it wasn't for Russian involvement. The whole rationale for us involving Russians in first place was strategic outreach and not economic frugality. This project could have been a blueprint for future cooperation, but to our bitter and painful realization is turning out to be a tale of misplaced priorities, misgivings and missed opportunities.
It's unlikely for SSGC/SNGPL/PARCO combo to lay this pipeline any cheap without compromising it's capacity. Pak Stream is supposed to use 56inch pipeline, while RLng III will use 42in. This will reduce it's procurement and construction costs but will also reduce it's capacity. Also, at present, for fixed assets, the guaranteed rate of return for SNGPL is 17.4% and for SSGC 17%. This might be beneficial for these companies in maintaining their monopoly, but is unlikely cheaper for end user.
For the argument that Russians are demanding a guaranteed profit (essentially making it take or pay/ sovereign guarantee from GOP), the same is demanded by these companies for their existing pipeline's capacity in order to be allowed for use by Tabeer/Energas. They are not going to waive it for their new pipeline nor will be interested in changing their guaranteed tariff regimes, in fact these companies already have guaranteed returns for fixed assets, and will make profit even if they won't receive nor deliver any gas, the definition of take or pay/ sovereign guarantee.
Before dumping PSGP, PD should provide a clear financial and execution layout for RLNG III and the ability of RLNG III consortium for meeting construction and COD timelines of 2023, the timelines for satisfying the desire to show for an energy infrastructure completion, just before the elections.
Although, a disappointing move, but I believe PTI is playing cheeky with Russians.
This RLNG III pipeline seems more of an afterthought for extracting further benefits from Russian side, specially during construction and operation (O&M) phases. Atleast, the IK supporter in me, wants to hope and believe this naive and simpleton notion, against the glaring idea of Tabish Gohar intentionally spoiling Russia-Pak ties. PTI did play this card brilliantly to some extent while negotiating its Lng contract, by involving SOCAR and others, and getting the lowest signed lng term contract to this date. Unfortunately, Russians are not naive and will regard this as a sabotaging act (with PARCO, comes in US/ Western EPC companies) and not a negotiation leverage, specially after them being extremely accommodating from ammending 2015's agreement from BOOT to 2021's 74-26% profit sharing mechanism with them being junior partners, to limiting rather completely sidelining any US sanctioned companies like Gazprom - traditionally all these "Streams" are constructed by Gazprom. They have a just reason to be frustrated.
On other hand, Pakistan is more than capable to handle this project on its own, and I would have advocated for Descon or any other local EPC companies for it, if it wasn't for Russian involvement. The whole rationale for us involving Russians in first place was strategic outreach and not economic frugality. This project could have been a blueprint for future cooperation, but to our bitter and painful realization is turning out to be a tale of misplaced priorities, misgivings and missed opportunities.
It's unlikely for SSGC/SNGPL/PARCO combo to lay this pipeline any cheap without compromising it's capacity. Pak Stream is supposed to use 56inch pipeline, while RLng III will use 42in. This will reduce it's procurement and construction costs but will also reduce it's capacity. Also, at present, for fixed assets, the guaranteed rate of return for SNGPL is 17.4% and for SSGC 17%. This might be beneficial for these companies in maintaining their monopoly, but is unlikely cheaper for end user.
For the argument that Russians are demanding a guaranteed profit (essentially making it take or pay/ sovereign guarantee from GOP), the same is demanded by these companies for their existing pipeline's capacity in order to be allowed for use by Tabeer/Energas. They are not going to waive it for their new pipeline nor will be interested in changing their guaranteed tariff regimes, in fact these companies already have guaranteed returns for fixed assets, and will make profit even if they won't receive nor deliver any gas, the definition of take or pay/ sovereign guarantee.
Before dumping PSGP, PD should provide a clear financial and execution layout for RLNG III and the ability of RLNG III consortium for meeting construction and COD timelines of 2023, the timelines for satisfying the desire to show for an energy infrastructure completion, just before the elections.
farok84
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From the horses mouth:
"The new LNG terminal operators will sign agreements on a take-or-pay basis regarding the allocation of pipeline capacity following the model of existing LNG terminals."
New gas pipeline to be built for uninterrupted LNG supply | The Express Tribune
The report said the pipeline was essential to smooth, uninterrupted supply of gas to consumers at affordable prices
tribune.com.pk
Hakikat ve Hikmet
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Dividends from the Afgan reconsolidation and reconciliation….
And, it’s just the beginning…..
Cry India cry…..
And, it’s just the beginning…..
Cry India cry…..
salarsikander
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Once a cow shit person stated on record that he will isolate Pakistan, Ganga monkey is nowhere to be seen now
farok84
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Gas pipeline: Russia concerned at reports?
ISLAMABAD: Russia is said to have expressed its concerns over reports that Pakistan is considering working out...
www.brecorder.com
Gas pipeline: Russia concerned at reports?
Mushtaq Ghumman Updated 12 Jul 2021
ISLAMABAD: Russia is said to have expressed its concerns over reports that Pakistan is considering working out alternate plan to construct the $ 2.5 billion Pakistan- Stream Gas Pipeline (PSGP) project from Port Qasim to Kasur, formerly known as North South Gas Pipeline, sources close to the SAPM on Power and Petroleum told Business Recorder.
Ministry of Foreign Affairs has conveyed Moscow's concerns to Petroleum Division, prior to the visit of a 12-member delegation headed by AA Tolparov, Deputy Director of Department of Foreign Economic Cooperation and Fuel Market Development. The delegation will hold four- day parleys with Pakistan starting from Monday (today).
Petroleum Division, which earlier agreed to a 56 diameters pipeline with Russia, is now considering using 42 diameter, which is more expensive. A Lahore -based company, which has close "liaison" with a key person in Petroleum Division, is keen to develop pipeline despite the fact it has not done any project of this level.
US Charge d' Affaires, Ms Angela Aggeler, also met the SAPM on Power and Petroleum a couple of days ago and sought update on the gas pipeline project. Some stakeholders fear that the meetings of Americans before talks with Russians could be aimed at creating confusion, which will not be liked at the highest level.
SAPM on Power and Petroleum Tabish Gauhar maintains that Russian companies are seeking return at par with IPPs, which is not feasible for Pakistan, and tweeted " the US Charge d' Affaires discussed various opportunities in Pakistan's power and petroleum sectors for American companies under existing and upcoming government policies and regulatory framework."
According to the Ministry of Foreign Affairs, following the recent signing of amended Protocol to the Inter- Government Agreement (IGA) between Pakistan and Russia on North -South Gas Pipeline some media reports citing an alternate plan of Petroleum Division for the construction of the project have surfaced. Reportedly, the plan envisages construction by Parco, Sui Southern and Sui Northern to preempt any failure of talks with the Russian government.
Ministry of Foreign Affairs argues that such reports seem at variance with the understanding reached with Russia at senior levels. The Russian government has expressed its political will to construct the pipeline since the IGA was signed in 2015.
The Russian Foreign Minister Lavrov during his recent visit to Islamabad (April 2021) reiterated Russia's resolve to construct the pipeline. Later, during a telephonic call with Foreign Minister Qureshi, Russian Foreign Minister Lavrov had emphasised that both countries should now work towards holding the ground-breaking ceremony of the project. Subsequently, the Foreign Minister wrote to Pakistan Minister for Energy stressing the need for finalizing the project expeditiously.
Also representatives of consortium of companies nominated by the Russian government for the construction of the pipeline recently met Pakistan's Ambassador in Moscow to discuss next steps in implementing the signed Protocol.
According to the Ambassador, such reports are likely to cause concerns in the Russian government/ officials, who approached the Pakistani embassy in Moscow requesting clarification of Pakistan government's position on the issue. Government of Pakistan and Government of the Russian Federation had signed an Inter-Governmental Agreement (IGA) on cooperation of a milestone project to develop gas transmission infrastructure of 42" to 56" pipeline diameter, costing US $ 2.25 -2.5 billion, that will ensure enhanced energy security of Pakistan. From Port Qasim to district Kasur, spread over 1,040 km length of trunk pipeline, the project will secure sustainable gas supply infrastructure for next 40 years. This will be the most essential conduit between installation of new LNG terminals and industrial growth of Pakistan . Besides, this is an historic strategic opportunity to strengthen investment relationship with Russia .
Pakistan Stream Gas Pipeline Project (formerly known as North South Gas Pipeline) was announced in a joint statement of Pakistan-Russia Inter Governmental Commission on November 26-28, 2014. The Economic Coordination Committee (ECC) of cabinet gave its approval, in principle, to it on January 10, 2015. Later, the Cabinet Committee on Energy (CCoE) authorized Petroleum Ministry to engage with Russian counterparts on October 14, 2015. The then Prime Minister accorded approval to the draft of the IGA through summary on July 8, 2015 and IGA was signed in Islamabad by Petroleum Ministers of the two countries on October 16, 2015. On April 11, 2016, ECC gave its decision on project model and constitution of PNE. However, ECC has also approved financing model of 1.2 Bcfd capacity RLNG-III pipeline by Suis on January 5, 2018.
According to the Petroleum Division, between 2015 and 2020, timelines to finalize the contractual agreement were extended six times. Meanwhile, the ECC decided to fund the project through GIDC on February 10, 2020. This was followed by the Supreme Court decision on the GIDC on August 13, 2020. On October 15, 2020, CCoE reiterated its decision to utilize GIDC in compliance with Supreme Court deadline which was ratified by the Cabinet with the direction to utilize GIDC subject to approval of GIDC on December 24, 2020. Consequently, GIDC Board gave its approval on December 28, 2020 and Rs.62.5 million was released to ISGS on May 25, 2021 after completing the formalities of Finance Division.
Federal Cabinet approved the Protocol to IGA on March 9, 2021. An amended IGA has been signed on May 28, 2021 whereas the original IGA was signed on October 16, 2015. At present, the structure of Russian consortium has been finalized being seventh version in the last five years in which the Russia-nominated entity has been identified as FSUE (Russian Ministry of Energy), ETK (Execution specialist) and PAO IMK (Production specialist) - with a company namely, PAKSTREAM LLC.
The sources said broad understanding has been achieved in the signed IGA equity share, role in decision making on selection of EPC contractor, pricing, FEED, risk sharing arrangements, facilitations and concessions/exemptions etc. According to the IGA, Pakistan nominated entity, Inter State Gas System, will undertake the project through GIDC proceeds of (74%) and external equity (26%).
Now the amended IGA paves the way for signing of shareholders' agreement, draft of which has been shared with Russia on December 23, 2020. In return, the Russian side shared the "Heads of Terms" on March 17, 2021. Both parties are working on critical aspects of "SHA" including shareholding structure of SPC, Corporate Governance model, project implementation arrangements, securities /guarantees, tariff, facilitation, and risk mitigation.
Petroleum Division maintains that at this stage, key challenges include finalization of "SHA" by July 27, 2021 for which the Petroleum Division is on look out for a professional legal team. A technical team comprising officials has been notified and negotiation strategy is being finalized through deliberations on "Heads of Terms" and "SHA", to safeguard commercial and economic interests of Pakistan.
Petroleum Division states that "project structure" needs to be finalized at the earliest. A decision about pipeline diameter needs to be made in the light of long-term energy needs and lifecycle costs. Decision about Pakistani companies' participation in EPC contract (local or international JV) needs to be made. GIDC component of financing (Rs. 321 billion) deposited in Federal Account No =I, needs to be assured for the project. Route alignment and land acquisition needs to be finalized.
Formal project feasibility is not yet ready which can be fast tracked through NESPAK for which a case for exemption from PPRA rules is in process. Work on alignment of completion of project with COD of new LNG terminals is also underway.
The sources maintained that looking at the overall picture, three scenarios are drawn which are as follows ;(i) in scenario No. 1, there may be the Russian EPC Contractor (along with external funding partner), and Pakistani firms may get business for supply of raw materials, labor, O & M, etc. Russia may enhance its equity contribution along with O & M contract post COD. Pipe manufacturing and compressor stations may go under the Russian control (to be manufactured outside);(ii) in scenario No. 2, a consortium of local and international companies takes a significant stake in the EPC contract along with enhanced financing exposure.
In case of local manufacturing of pipeline, the project will deliver enhanced local technical/HR contribution, like SNGPL and SSGCL and along with an international partner may take long- term O& M contract and ;(iii) in case of a situation where Russians are no more interested in the project, Pakistan has to be ready with a contingency plan. Pakistan may form a consortium of local and international companies to win EPC contract along with enhanced financing exposure. Local manufacturing of pipeline may be introduced to ensure maximum local technical/HR contribution and SNGPL and SSGCL along with an international partner may take long-term O & M contract.
In order to move forward, Petroleum Division sought policy direction from CCoE on "SHA" negotiation, project structure and financing arrangements as well as allowing Petroleum Division to give a strong signal to local firms to form JV ahead of selection of EPC contractor. Petroleum Division also argues that it may be allowed to sign local steel manufacturing industry to prepare for the forthcoming challenge.
All this will be based on a firm commitment from the Finance Ministry for advance releases of GIDC installment, commensurate with project expenditures while Petroleum Division continues to evolve its understanding on contingency plan in case of deadlock with the Russians.
On June 24, 2021, the CCoE Chairman, Asad Umar, observed that the issue was very important for the future economic growth and energy requirement of the country. Moreover, various directions have already been conveyed by the CCoE from time to time. Therefore, the project needs to have financial close without further loss of time.
The Committee also observed that there are massive negative consequences of delays in the implementation of this project and the deadline set by Supreme Court of Pakistan has already been missed, with no imminent possibility of start of work. Therefore, an alternate plan needs to be finalized as soon as possible, but not later than mid-July 2021.
Copyright Business Recorder, 2021
Few points to ponder:
1. Which "International Company" is part of the RLNG III consortium and how will their participation reduce our financial exposure?
2. Who are the unspoken 'International Partners' for Engineering, Procurement & Construction (EPC) of RLNG III pipeline?
3. Which Pakistani pipeline company can manufacture 42in or 56in dia pipeline and fittings in-house? If there are none, than setting up one will take atleast a year or two itself (at lightning speed), after which it will start production and at what rate? This alone will delay the project atleast few years. But if somehow the supply chain for raw materials can be secured and the plant can become operational in a timely fashion, we should go for it. Just one problem, which "International Partner" will provide the raw materials and setup these plants?
The question has already been answered by Hammad Azhar, in either case pipelines, will be imported as we don't have any such capacity at the moment.
4. What "tariff" has been proposed by the RLNG III consortium? Will it be "take and pay" or "take or pay" basis? How generous is our "International Partner" going to be?
5. That Lahore based construction company likely "Descon" is going to be involved (as local contractor or sub-contractor) for both the scenarios and is quite capable for handling all aspects of EPC. Maybe ISGS prefers FWO, and hence the shenanigans.
This is a botched attempt by US to sabotage Pak-Russia relations. All the local characters and facilitators must be identified and taken to task by GOP.
Last edited:
Genghis khan1
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5 years and still no progress. Russians are All talk, No walk. Since Pakistan is doing majority, 75% of the financing, go get Kinder Morgan and get it done.
www.kindermorgan.com
Energy Infrastructure & Solutions | Kinder Morgan
We're one of North America's largest energy infrastructure companies. Our pipelines transport natural gas, carbon dioxide (CO2) and more. Contact us today.
www.kindermorgan.com
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