North-South Gas Pipeline; Pakistan and Russia’s Renewed Commitment

CRSS North South Pak RussiaThe relations between Russia and Pakistan have remained turbulent over the years, however they have been warming up over the last decade, with top political, diplomatic and recent military engagements. However, economic interests seem to have taken the lead in bilateral cooperation.

In a latest development, Pakistan has extended the validity period of a $2 billion deal for the North-South gas pipeline which will be laid by Russia under a government-to-government arrangement. The two sides inked an understanding in October 2015 for the construction of the said pipeline; transmitting imported liquefied natural gas (LNG) from Karachi to Lahore to satisfy Pakistan’s fuel demand. Though, the understanding was set to terminate on October 16, 2018, nonetheless Pakistan extended the deal during the current visit of a Russian delegation that had arrived to finalize a commercial deal for the project.

Russia has designated state-owned RT Global Resources for project execution and it was required to sign a commercial agreement with Pakistan’s Inter State Gas Systems (ISGS).

The 1,100 kilometer pipeline with a capacity of 12.4 billion cubic meter per annum will connect Karachi’s liquefied natural gas (LNG) terminals with those in Lahore. The period of construction is 42 months and project will be implemented in three stages. First, by the second quarter of 2018, the gas pipeline will be built. Second, by the second quarter of 2019, part of the compressor stations will be completed. Third, by the second quarter of 2020, all compressor stations will be commissioned bringing the pipeline to its full capacity, which is 12.4 billion cubic meters a year.

The construction of the pipeline will make available orders for Russian industrial enterprises and will contribute to an increase in non-oil exports. The project will open up a new market for Russian companies. The project will be implemented in compliance with BOOT model (Build-Own-Operate-Transfer). The pipeline will be owned and operated by the project company for 25 years. During this period, payments for gas deliveries will help the company return the investments and generate profit after that the pipeline will be handed over to the government of Pakistan.

Moreover, Moscow had demanded $ 1.2 per unit for gas transmission. However, a negotiating committee, set up with approval of the Economic Coordination Committee (ECC), brought the rate down to $0.78 per mmbtu during talks.



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