Russia offers 85 cents per mmbtu tariff for RLNG pipeline project

ISLAMABAD: In a major development, Russia has offered 85 cents per mmbtu gas transportation tariff in the 800 kilometres RLNG pipeline to be laid down from Nawabshah to Lahore.

Both the countries have completed negotiations on the government-to-government framework agreement and to this effect the Ministry of Petroleum and Natural Resources (MoPNR) would soon send a summary to the cabinet seeking approval, a senior official told The News. This development surfaced in a recent interaction that took place in Islamabad between the authorities concerned of both the countries. 

The 800 kilometres pipeline will be built on Boot (build, own, operate and transfer) basis under which a Russian company -- RT (Rostec) Global Resources -- will provide financing and construct the pipeline project and will run it for 25 years and after that it would hand over the project to Pakistan. In the Boot model, operational cost would also be included in the tariff.

The Front End Engineering Design (Feed) and route survey for the project is yet to be completed. However, feasibility of the project has been completed.

“Earlier, the length of the pipeline stood at 1,100 kilometres from Karachi to Lahore, but in a latest scenario we have asked RT Global Resources, a Russian state corporation, to lay down it from Nawabshah to Lahore which is why the cost of the project will go down,” the official said, adding that the portion of the pipeline from Karachi to Nawabshah will be taken care of by the state-owned gas companies.

The government of Pakistan has designated Inter-State Gas System (ISGS) as company that will deal with Russian company on all the affairs of the project. In case of approval of the negotiated agreement by the cabinet, Price Negotiation Committee (PNC) would deliberate the tariff offered by the Russian side and after that both sides would enter into commercial agreement.  “The Russian side has provided the draft contract to Pakistan and after thorough examination of the draft we will respond,” the official said. “We also need to enter GTA (gas transportation agreement) with the Russian company in addition to finalising the implementation plan,” he said.

When asked about the US sanctions already imposed on RT Global, he said Russian top management has assured Pakistan that in case US objects to the said company, Russia will replace it with another company. More importantly, the Ministry of Law has given go-ahead for the award of $2 billion liquefied natural gas (LNG) pipeline contract to the energy firm designated by Russia, though the US has slapped sanctions on the company.

“Though the Russian side has worked out the cost of the project at $2.1 billion, but we are on toes on this issue and are also optimistic to persuade the Russian side to bring down the cost of the project,” the official said. 

Russia is the second largest producer of natural gas in the world and is seeking to diversify its export markets after a standoff over the Ukrainian dispute with the European Union, its main buyer. It has also offered LNG export to Pakistan.