Wednesday June 07, 2023

Technical talks on $3b PSGP project end

August 27, 2021

ISLAMABAD: The three-day technical talks between Pakistan and Russia on the Pakistan Stream Gas Pipeline (PSGP) project to be laid down from Karachi to Kasur ended here on Thursday with Moscow seeking clarity if the government owns or disowns the viewpoint of Special Assistant to Prime Minister (SAPM) on Petroleum Tabish Gauhar, opposing the two countries’ flagship project mentioned in his letter to Energy Minister Hammad Azhar.

"During the three-day talks, the Russian side said that there is no statement from the government side on opposition to the project by the SAPM, which was very disturbing," officials who were part of the talks told The News.

On July 23, the SAPM on Petroleum wrote a letter to Energy Minister Hammad Azhar with the subject on ‘Beyond the Fire Fighting – Proposed Strategic Work streams in the Energy Sector’, giving his version on the PSGP project saying: “We can meet the projected gas demand for the next 10-15 years with a relatively smaller (42 inch) diameter pipeline with the help of local gas companies at a potentially lower upfront project cost (savings of up to $500 million)”.

Russians are of the view that the SAPM is a part of the government and has never been part of the talks on PSGP, but the ex-SAPM Nadeem Babar was a part of the talks on the project and gave his 100 per cent input in finalising the amended Intergovernmental Agreement (IGA) between the two countries.

The secretary petroleum was asked as to whether he, being the government representative, rejects the objection of SAPM or not on the PSGP project. The secretary couldn’t come up with a satisfactory answer. The sources said in future, if the Petroleum Division through the MOFA (Ministry of Foreign Affairs) does not clarify the position on PSGP, then this issue may be taken up at a high level forum between the two countries.

However, during the talks, the Russian side raised certain objections on the route of the pipeline worked out by the NESPAK, saying that the route mentions the passage of the pipeline within and through many cities, which will not only hike the cost of the land because of market prices but also trigger security concerns.

It was also noticed during the talks that the ability of both the Sui companies was not up to the mark for the construction of the pipeline keeping in view the modern techniques in the world. So much so, the experts from both the gas companies during the meeting could not come up with proper answers when they were asked basic questions, including the welding of pipelines.

The source said that the Russian side wants to ink first the facilitation agreement prior to signing the shareholding agreement. It was decided that the Russian team would again come to Islamabad by mid of September to finalise the facilitation and shareholding agreements, which will be formally signed in Moscow in November. The representative of both the Sui gas companies first said that there was no demand of gas for which the said project was needed and then they also changed their stance, saying if kept in view the next 10-15 years' demand, then a 42-inch diameter gas pipeline was needed.

However, the Russian side said Pakistan should come to Moscow to discuss debt financing issues, once all the issues are finalised. It was also observed that there has been no project feasibility done so far. And the government for this purpose has not hired the NESPAK to this effect. The Pakistan government wants the NESPAK to complete FEED (Front End Engineering Design). The Russian experts say that they have worked on pre-FEED studies that can be part of the FEED. But it was decided that a special purpose company (SPC) that will be formed for the project will initiate the proceedings on FEED and bear the expenses.

According to the sources, the Russian side says that on-ground work on the pipeline will begin by December 2022 once the FEED gets completed by February-March 2022 and the project will be completed and commissioned by the end of 2024 if there is a smooth sailing and no big issue comes in the way of implementation of the project.

During the talks, the Russian side didn’t show any willingness for 49 per cent shareholding and they remained glued to their 26 per cent shares in the project. The Russians, however, signaled that if Pakistan insists Russia to increase its shareholding, then Moscow will go for majority shares up to at least 75 per cent.

However, both the sides decided to go for planning to connect the pipeline with Underground Gas Storages Projects in Sindh (A proposal under active evaluation at the Petroleum Division) and the TAPI Gas Pipeline crossing point in Multan. Both sides will continue to exchange notes, relevant data and information on design documents.

They have also agreed to technical specifications, design parameters and transport of RLNG from Karachi to Kasur. Both the parties have resolved to set and follow the laid down timelines to successfully implement the Pakistan Stream Gas Pipeline Project. Both the delegations reaffirmed their commitment to the project ensuring the highest standards of technical, quality parameters and maximum utilisation of Pakistani resources. This shall also act as a forerunner of the growth of the Sui companies in terms of enhancement of technical, operational and training capacities.