North-South Gas Pipeline Project: Financing plan ready, govt to be majority owner

ISLAMABAD: In a welcoming development, a new financing plan has been prepared for construction and execution of 1,100km North-South Gas Pipeline Project (NSGPP), with the Government of Pakistan being the majority owner, a top official of the Ministry of Energy told this reporter.

Under the new scenario that emerged out of Aug 13, 2020 Supreme Court judgment, the Petroleum Division will have maximum liquidity. The Finance Division has over Rs302 billion collected in the head of Gas Infrastructure Development Cess (GIDC) whereas the government entities will have to collect over Rs517 billion from various sectors of economy in 24 installments. The Petroleum Division will invest in the project from the GIDC funds.

“The government wants to undertake the project in six months keeping in view the SC judgment, which validated the GIDC Act, 2015. If the work is carried out within the prescribed time and for laying any of the two other major pipelines (IP and TAPI) the political conditions become conducive, the purpose of levying Cess shall be deemed to have been frustrated and the GIDC Act, 2015 would become permanently inoperational and considered dead for all intents and purposes,” the official said.

“And to this effect, the Petroleum Division (PD) on September 07 dispatched a letter to the Russian government inviting a Russian team for talks to finalize the commercial agreement and introduce some changes in the inter-governmental agreement earlier signed between the two countries,” the official said.

It is pertinent to mention that both the countries have already agreed on the new structure of Russian companies headed by ETK to initiate and execute the project. Under the proposed financing plan, the cost of the project has been estimated by the Inter-State Gas System (ISGS) at $2.25 billion, which was earlier worked out at $1.7 billion.

The scope of the project has been increased, as its capacity to transport the RLNG will be enhanced from 1.2bcf (billion cubic feet) per day to 1.6bcf per day. The pipeline will transport the RLNG to be re-gasified by the new LNG terminals, which will be installed on private-to-private business model. The federal cabinet has recently allowed establishment of two new LNG terminals at Port Qasim. Many are in the race.

He project would be executed under the Special Purpose Vehicle (SPV) namely Pakistan-Russia Joint Venture with proposed equity share either with 75:25 or 70:30 or 80:20 equity. Pakistan’s share would be either 75 percent or 80 percent and that of Russia either 20 percent or 25 percent. To a question, the senior official of Petroleum Division disclosed that the GIDC Board approval would be obtained for availability of GIDC funds and its use.

After meeting with the Russian experts, the federal cabinet will approve the project within 60 days. The official said the project implementation schedule would be aligned with new LNG Terminals’ Commissioning date to get the commitment for the pipeline capacity.