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Pakistan, Russia meet today to discuss $2b LNG project.

Byline: Zafar Bhutta

ISLAMABAD -- Pakistan and Russia are set to meet in Moscow today (Tuesday) to discuss the course of action on implementing the $2-billion LNG project after the US imposed sanctions against the Russian energy firm designated to build the pipeline.

Pakistani side will also negotiate a LNG supply deal with Russian firm Gazprom.

Pakistan's $2 billion LNG pipeline project hits a snag

Petroleum Minister Shahid Khaqan Abbasi will lead the delegation which comprised of Interstate Gas Systems (ISGS) Managing Director (MD) Mobin Saulat and Ministry for Petroleum Joint Secretary Tauqeer Hussain.

Russia had signed a government-to-government (G2G) deal with Pakistan to lay the $2 billion North South Pipeline from Karachi to Lahore to transport imported LNG and nominated RT Global to implement the project.

Russian President Vladimir Putin was to visit Pakistan to perform the ground breaking ceremony of the project for which Moscow will lend Islamabad $2 billion

However, US imposed sanctions against RT Global, causing bottlenecks to implementing $2 billion LNG pipeline project. Pakistan's Interstate Gas Systems (ISGS) and Russia's RT Global were supposed to sign a commercial agreement to implement the project.

During the talks, Russian side would update the Pakistani side about the sanctions imposed against RT Global. Officials said that Russia could replace RT Global with some other company which was not facing US sanctions.

Karachi to Lahore pipeline: Pakistan, Russia seal $2 billion energy deal

The firm, which is a Russian State Corporation, was to lay the 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. Under the agreement, Pakistan would provide 15 per cent equity whereas 85 per cent funding would be provided by the Russian firm. The first phase of the project is expected to conclude by December 2017.

Pakistan has worked on a similar model with China under which a Chinese firm would lay the Gwadar LNG pipeline to Nawabshah and build an LNG terminal at the deep-sea port at a cost of $2.5 billion.

LNG supply deal with Russia

The financing for the LNG pipeline by Russia comes as a result of Russia's eagerness to sell LNG to Pakistan. Russia is the second-largest producer of natural gas in the world, and was seeking to diversify its export markets after a spat over Ukraine with the European Union, its main buyer.

During talks, two sides would also discuss LNG supply deal on a G2G basis. Gazprom had expressed interest to supply LNG to Pakistan. Pakistani side had informed Russian side that there was a need of 4.5 metric tons per annum of LNG from the second quarter of 2017. Pakistan has recently awarded contract of 60 LNG cargoes to Gunvor.

LNG pipeline, terminal: Govt to decide on Chinese firm's bid in a month

LPG air mix plants

Two sides will also discuss plan of setting up LPG-air mix plants by Russian company. Russia had nominated RusGaz Engineering and targeted commissioning timelines of May 2016.These plants would be set up in areas where pipeline network was not available to supply gas.

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Author:Zafar Bhutta
Publication:The Express Tribune (Karachi, Pakistan)
Geographic Code:9PAKI
Date:Jan 19, 2016
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