Second day of talks on PSGP: Russia seeks sovereign guarantee for 18pc profit on its 26pc stakes in project

ISLAMABAD: Russia has asked for security and guaranteed rate of return of 18 percent in dollar terms on its 26 percent investment in Pakistan Stream Gas System (PSGP) during the second day of talks here on Tuesday.The 12 member delegation from Moscow remained optimistic and their body language was quite positive showing to make the project talks successful.

Pakistani side headed by Secretary Petroleum Dr Arshad Mehmood asked for quality performance of the pipeline, timely completion with legal exposure. Pakistani side reaffirmed its commitment to the PSGP, saying it would not go out of the ambit of the amended Inter-Governmental Agreement (IGA) approved by the federal government in talks for the project.

Both sides also agreed on broad principles to advance talks on shareholders’ agreement. Pakistan will be having 74 percent shares and Russia 26 percent.

Pakistani side objected to all the heads of terms which were prepared by Russian side, seeking clarity asking the other side to revise and reword them also, and both sides will start talks again today (Wednesday) on the head of terms. According to the source Pakistani side wants to pay the rate of return to Russian side on its investment in the project in rupee terms. However, it has been decided by both sides that it will be discussed another day.

Both sides kick started talks in two sessions on Tuesday. In the morning session started at 11.30 am, a technical presentation was made by Russian side on the project, its design, survey, environment survey and FEED (Front End Engineering Design) and other related issues. The Pakistan side held technical discussion on it.

In the second session, both sides sat across the table with their stated positions on heads of terms. Later on, Pakistan team prevailed and convinced the Russian side to revise its all heads of terms to make them acceptable and reword them for the sake of clarity. The official said that both sides would again deliberate revised heads of terms today (Wednesday). Under the amended IGA signed between the two countries on May 28, both sides are bound to sign the shareholders agreement and develop consensus on heads of terms and other commercial deals within 60 days.

The official said that Pakistani side kept on cross questioning on every head of term and the Russian side agreed to change the heads of terms the whole night and would come up today (Wednesday) with revised heads of terms for talks.

The cost of the project has been estimated at $2.25 billion by Pakistani officials, but it will be finalised once the scope of the project with diameter of pipeline is fixed.

The pipeline of 1,122 kilometers will be laid down from Karachi (Port Qasim) to Kasur (Punjab). As per the IGA signed in 2015, Russia had to build the gas pipeline project on its own, with 100 percent financing.

Both the countries are attaching paramount importance to the project. The PSGP will increase the country’s capacity to transport the imported gas (LNG) from the port city to Punjab. The country’s existing system has the capacity to import and transport RLNG of 1.2 billion cubic feet. The country has two LNG terminals -- one is owned by Engro and the other by the Pakistan Gas Port.

Two more LNG terminals are being installed, one by Energas and second by Tabeer company. The new terminals will increase the country’s ability to import and re-gasify LNG by 1.2-1.5 bcfd. And there is no pipeline available to transport RLNG within the country, which will be imported and re-gasified by new terminals. For transport of more RLNG, Pakistan badly needs the North-South Gas Pipeline.