New Pakistan Gas Pipeline Proposed

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New Pakistan Gas Pipeline Proposed

Fri, 07/23/2021 - 08:19
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Flags of Russia & Pakistan (copyright by Shutterstock/NINA IMAGES)
Flags of Russia & Pakistan (copyright by Shutterstock/NINA IMAGES)

As part of efforts to tackle Pakistan’s energy shortages. It has been agreed, by both the Pakistan and Russian governments to explore the viability of building a 1,100-km gas pipeline from Port Qasim in Karachi to Lahore at an estimated cost of USD 2.5-3 billion by the end of 2023. The project is called the Pakstream Gas Pipeline Project commonly known as North-South Gas project. It will enable LNG imports from such gas producers as Oman, Qatar, Russia, the US, and Australia to deliver gas to customers in Pakistan’s interiors, such as power plants, factories, and cities.

Pakistan and Russia have signed an agreement for the construction of about 1,100-km gas pipeline from Port Qasim in Karachi to Lahore at an estimated cost of USD 2.5-3 billion by the end of 2023.

The Pakstream Gas Pipeline Project is a joint venture, using a special purpose vehicle funding model, with Pakistani interests holding 74 percent and Russian interests 26 percent. However, the terms of the agreement enable Russian interests to withdraw from the venture if the project proves not feasible or increase their share holding to 49 percent.

The Russian side will assemble funding for foreign exchange components through suppliers' credit or typical project financing to cover imported items like steel, consultancies, pipelines and related products and materials not available in Pakistan. The concession agreement for the pipeline will remain in force for 25-30 years. The pipeline size was agreed at 56-inch diameter to accommodate for next 30-40 years of energy needs in the country that will make sure 700-800 million cubic feet per day (mmfcd) of free gas flow, which can go up to 2,000mmcfd with compressors.

The next steps will be the signing shareholders' agreement, financial agreement, gas transportation agreement and lenders agreement during which time the Russian side will complete the front-end engineering design (FEED) and the Pakistani side will arrange dollar financing of local currency component against Rs321bn worth of Gas Infrastructure Development Cess.

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