Pakistan allocates $87m for North South Gas Project
Aftab Ahmed
Islamabad: Pakistan has allocated $87 million to execute North-South Gas Pipeline Project.
The project will also be a new stream of revenue for Pakistani utilities-SNGPL and SSGCL.
Two Sui companies-SNGPL and SSGCL will be a partner in this project. These companies will also become a partner with Russian companies in executing the gas pipeline project.
SNGPL has experience in building a pipeline with a 42-inch diameter. However, Russian companies have experience in building a pipeline with 56-inch diameters that will transport 2 billion cubic feet per day (bcfd) gas.
Russian firms will execute the project in a joint venture with SNGPL and SSGCL. Russian and Pakistan will set up a joint company. However, Pakistan will be a major shareholder with 74 percent of this gas pipeline project.
The finance ministry has allocated these funds out of collections on account of Gas Infrastructure Development Cess (GIDC).
The government has also decided Petroleum division will not use the GIDC funds until the North-South Pipeline starts revenue generation.
Sources told Newztodays.com that Finance Ministry had allocated $87 million project financing of the North-South Gas Pipeline (SNGP) project for the financial year 2020-21.
Given the financial constraints, officials said that the Petroleum Division will not add more projects to its portfolio to be funded by GIDC until any GIDC funded projects start generating a revenue stream.
Earlier, Pakistan and Russia had agreed to rename North-South Gas Pipeline Project” to the “Pakistan Stream Gas Pipeline (“PSGP”) Project” due to the major shareholding of the former.
Pakistan will hold 74 percent shares, whereas Russia will own 26 percent shares.
Energas and Tabeer Energy are setting up two LNG terminal which requires the new pipeline to transport imported gas to Punjab province.
The Cabinet Committee on Energy (CCoE) has already decided to allocate the idle capacity of the existing LNG terminal to private parties till the commissioning of new LNG terminals.
However, the new parties-Energas and Tabeer Energy are building pressure on the government to roll back this decision and want the allocation of pipeline capacity.
However, petroleum division officials are of the view that these companies will become a trader and may back out their terminals plans if the government allocates pipeline capacity.
This will also violate third-party access rules that guarantee fair competition in the allocation of pipeline capacity.
New and existing LNG terminals will transport gas through this pipeline project. The two sides also signed a protocol on the revised structure.
Pakistan and Russia had agreed to implement the project through a special purpose company. They will incorporate in Pakistan and Russian parties, wherein Pakistan will have the majority shareholding.
The Ministry of Energy (Petroleum Division) of Pakistan and the Ministry of Energy of the Russian Federation held the first Russia-Pakistan Technical Committee meeting from 16th to 18th November 2020 in Islamabad. It aimed at cooperation to develop the North-South Gas Pipeline Project.
Moreover, the project is a flagship strategic venture between Pakistan and Russia’s institutions. It shall strengthen the long-term bilateral ties between Pakistan and the Russian Federation through people-to-people contact. The Project will begin a new era of economic cooperation between Pakistan and the Russian Federation.
Additionally, it will benefit Pakistan’s people as a result of ensuring optimum gas tariffs. Both sides affirmed the maximum utilization of Russian and Pakistan materials, equipment, and resources. This will enhance Pakistani companies’ technical and operational capacity and human resources through mutual working and training.
Both sides agreed to sign a protocol for amendment in the Inter-Governmental Agreement (IGA) earlier signed in 2015 between both the Governments to reflect the revised implementation structure of the Project after requisite approvals from respective Governments.
