Russia, Pakistan initiate crucial talks on NSGPP from today

ISLAMABAD: Both Russia and Pakistan are going to initiate the three days crucial talks from today (Monday) here in Islamabad on the much trumpeted North South Gas Pipeline Project (NSGPP) that has already been delayed by five years. Both the countries want to make this project a touchstone for paving more strategic relationships not only in economic, energy and industrial sectors but also in the defence sector.

Russian troops are already in Pakistan for joint exercises. In the past, Russia helped Pakistan build Pakistan Steel Mills (PSM), and country’s flagship organisation in the oil and gas sector –OGDCL. Pakistan is also currently importing wheat from Russia to cater to its food requirement. This time, both the countries are extending the required emphasis to finalise all prerequisites prior to embarking upon the work on approximately $2.25 billion project in an amicable manner.

The NSGPP has already gone through many ups and downs and got delayed by 5 years; even then Russia remained committed with the project, showing how much Moscow is still very much keen to develop strategic stakes in Pakistan.

The Russian technical team headed by DL Kapnik, Special Representative of the Russian Ministry of Energy for Project Implementation, has arrived in Islamabad. Ms Saira Najeeb, Managing Director of Inter State Gas Company (ISGS), will represent Pakistan in the talks.

And during the 16-18 November, 2020 talks, the technical teams from both sides would amend the Inter Government Agreement (IGA) and discuss the new structure of Shareholders Agreement (SHA) between ISGS and Russian Nominated Entity. Both the sides will also review and discuss the Memorandum of Association and Articles of Association of JV Company apart from preparation and finalising the way forward on the project.

Pakistan has already briefed the Russian side about the GIDC (gas infrastructure development cess) verdict by Supreme Court enabling the government to have liquidity enough to finance the project. About Rs305 billion, collected under the head of GIDC from the masses, are lying with Finance Division and Rs517 billion is yet to be recovered from some players such as fertilizer, CNG, power sector, and industrial sector in the country’s economy, which will now pay the GIDC amount to the government in 60 installments after decision by SC.

Under the new scenario, Islamabad has proposed that Pakistan will be having majority equity shares of 51 percent in the project with a leading role in the project and offer 49 percent to Russian side. In the 51 percent equity, cost of land acquisition, security and gas companies’ services in civil works will also be part of equity from Pakistan’s side. It will also be decided as to how to advance on the project in EPC (Engineering, Procurement and Construction) and ROE (Return on Equity) in the BOOT (build-own-operate and transfer) mode basis for 25 years.

Pakistan wants construction through Sui companies, FEED by Joint Venture Company, Russia to provide compressors, pipeline and other equipment. TMK is world No. 1 pipeline producer and its role in laying down the pipeline of 1100 kilometers due to its vast experience worldwide will be of great assistance. Russia has matchless expertise in laying down pipelines either in deep sea or on ground. The pipelines and compressors from Russia are also considered the best ones in terms of quality.

According to the official sources, Pakistan will also seek formal guarantee from Russian Federation side on its newly proposed structure for the project as a mature, merit based and technically sound financially viable and legally strong structure will suit both sides in building a strong foundation for long term Pakistan-Russia strategic relations. The officials also stressed urging that there must be a strong watch on spoilers by the Petroleum Division as the project has already been delayed a lot. And now the country cannot afford to delay this project of paramount importance.

No company in the project is sanctioned, their financial health and also experience in this field. Russia is coming up with a structure with its state owned company Federal State Unitary Enterprises (FSUE) along with TMK or ETK (as per companies merit standing).

They also told The News that the construction of NSGPP will be initiated under Special Purpose Vehicle (SPV). Under the SPV, a Joint Venture Company (JVC) will be established with board of directors (BoDs), having equal representation in the board. The JVC company will hire a third party for carrying out FEED (Front End Engineering Design) for the project.

NESPAK has been assigned to initiate the feasibility of the project, conduct a survey and complete the study on Environment Assessment Impact (EIA). And the government will seek PPRA exemptions for NESPAK.

The sources also told that the Petroleum Division is going to dedicate $2 billion for the project informing that the project will be commissioned in three years’ time, so the disbursement of the financial supply by the finance division would be made in a staggered manner. They also said that the Finance Ministry has opened an NSGPP assignment account also.