Pakistan, Russia to firm up gas pipeline project agreement

Published August 27, 2021
Pakistan and Russia eliberated on technical specifications, design parameters and transport of RLNG from Karachi to Kasur. — AFP/File
Pakistan and Russia eliberated on technical specifications, design parameters and transport of RLNG from Karachi to Kasur. — AFP/File

ISLAMABAD: Pakistan and Russia on Thursday agreed to sign a shareholders agreement (SHA) and facilitation agreement (FA) for a gas pipeline project from Karachi to Kasur (Lahore) worth about $2.5 billion next month to start a series of simultaneous steps for its implementation.

The three-day technical session on about 1,100km Pakistan Stream Gas Pipeline Project concluded here on Thursday, with a joint statement saying the project made significant headway. The two sides would exchange the draft SHA and FA within a week so that these could be formally signed on Sept 17, an official told Dawn.

The parties decided to expedite technical studies and surveys. Both sides agreed to further expedite planning stage works, including field surveys, reconnaissance survey and studies.

They also deliberated on technical specifications, design parameters and transport of RLNG from Karachi to Kasur, the joint statement said.

Decide to expedite technical studies, surveys about Karachi-Kasur pipeline

“Adequate provisions would be planned to connect the pipeline with proposed Underground Gas Storages Projects in Sindh and the Turkmenistan-Afghanistan-Pakistan-India (Tapi) Gas Pipeline crossing point in Multan,” said the statement, adding that both sides would continue to exchange notes, relevant data and information on design documents.

“This is in furtherance to the Heads of Terms (HOTs) agreement that was finalised” during a meeting in July, the statement said, adding that the project was a reflection of the expanding bilateral relations between Pakistan and Russia. “It shall act as a catalyst in elevating the entire gamut of relations between the two countries.”

The Russian delegation was led by Vladimir I. Shcherbatykh, Chief Executive Officer and other representatives of Pakstream LLC, a Russian nominated entity under the Inter-Governmental Agreement (IGA) signed between Pakistan and Russia in May this year.

The Pakistani side was led by Dr Arshad Mahmood, Secretary, Petroleum Division of the Ministry of Energy and included Syed Zikria Ali Shah, Managing Director, Interstate Gas Company, (Pakistan side nominated entity under IGA), Directorate General Gas, Directorate General Liquid Gases, and technical and legal representatives of the Sui Northern Gas Pipelines Company Limited and Sui Southern Gas Company Limited.

The respective parties have resolved to set and follow laid-down timelines to successfully implement the Pakistan Gas Stream Pipeline Project. Both the delegations reaffirmed their commitment to the project ensuring highest standards of technical, quality parameters and maximum utilisation of Pakistani resources. This shall also act as a forerunner of the growth of the Sui companies in terms of enhancement of technical, operational and training capacities.

The joint statement said the parties agreed in principle to finalise the Shareholder Agreement of the project at the earliest so that Project Company can be incorporated in Pakistan by Pakistan and Russian parties.

It has already been agreed that Pakistan shall have a majority shareholding. Both sides agreed that the project shall act as a harbinger of constructive and meaningful cooperation between Pakistan and Russia and elevate this flourishing relationship.

Under the HOTs signed on July 15, the 1,100-kilometer gas pipeline from Port Qasim Karachi to Lahore has to be completed by the end of 2023 at an estimated cost of $2.5-3bn.

The two sides have already agreed over 74:26 percent shareholding in the special purpose vehicle (SPV) for the project. This envisaged both ‘put option’ and ‘call option’ to Russian side which meant its entities could move out of the project if the project is not found feasible or increase its shareholding to 49pc if it is able to provide attractive financing arrangements acceptable to Pakistan. In any case, Pakistani entities would maintain majority shareholding.

Published in Dawn, August 27th, 2021

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