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September 28, 2018

$10 bn offshore gas pipeline: Pakistan, Russia sign MoU for feasibility study

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September 28, 2018

ISLAMABAD: As a sign of increasing economic cooperation, Pakistan and Russia on Thursday signed an inter-governmental agreement to conduct feasibility study for building $10 billion offshore gas pipeline to supply gas from Russia to Pakistan. This project has been planned by the Russian government to capture Pakistani market and the Memorandum of Understanding (MoU) was signed in Moscow. Russian energy giant Gazprom would conduct the feasibility study on its own expenses to assess economic viability and cost of the project.

From the Pakistani side Sher Afgan, Additional Secretary, Ministry of Energy and Petroleum Division, and Deputy Prime Minister Anatoly Yanovsky on behalf of the government of Russia signed the MoU.

Mobin Saulat, Managing Director Inter-State Gas Systems (ISGS), a state owned company with a mandate to build gas pipelines and gas import projects also witnessed the signing ceremony. During the occasion of signing ceremony, two sides expressed interest to enhance bilateral relation in energy sector.

Pakistan has been experiencing gas crisis, particularly in winter, for the past many years as domestic production has declined with new additions being offset by depleting old deposits. In a bid to tackle the crisis, the PML-N government started liquefied natural gas (LNG) imports from Qatar under a 15-year agreement and brought supplies from other sources as well.

The ISGS is also working on Turkmenistan-Afghanistan-Pakistan-India (Tapi) gas pipeline. It has also been designated by Pakistan for executing the pipeline project along with Russia’s energy giant Gazprom.

The under construction China-Pakistan Economic Corridor (CPEC) is making the region more important for the foreign investors and with the passage of time, the demand for energy sources is anticipated to increase manifold in years to come. The Special Economic Zones (SEZs) are being constructed under the CPEC and provide tax and duty exemptions to investors that would help boost industrialisation in the country. The offshore gas pipeline will meet energy needs of industries being set up in the economic zones along CPEC route.

The pipeline will connect Pakistan and Russia and act as an energy corridor between the two countries. Besides, with this cooperation, Pakistan would also gain access to the Russian market in order to boost its overall exports.

Russia has nominated Public Joint Stock Company, Gazprom for implementation of the project. Pakistan’s cabinet has permitted the company to conduct the feasibility study at its own cost and risk.

Separately, ISGS is working on the $10 billion Tapi gas pipeline which will connect South and Central Asia. Construction work on the scheme in Pakistan is planned to start in March 2019. These projects are termed game changer for Pakistan as they will not only lead to regional connectivity, but will also meet growing energy needs of the country.

Owing to a long-running tussle with Europe and the United States over the annexation of Ukrainian region of Crimea, Russia is looking for alternative markets and wants to capitalise on the increasing energy demand in South Asia.

Russia has been a huge gas exporter to European Union (EU) countries and Turkey since long and despite US anger, Moscow has continued to provide gas to them. Moscow receives gas from Turkmenistan and then exports it to EU states.

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