Four-day talks on $3 bn PSGP end: Pakistan, Russia fail to finalise shareholding contract

ISLAMABAD: The four-day Pak-Russia talks on Shareholding Agreement (SHA) on the $3 billion Pakistan Stream Gas Pipeline Project ended here on Thursday with both sides failing to finalize the 175-page contract.

Under the amended IGA signed in Moscow on May 28, 2021, with Pakistan having 74 percent shares and Russia 26 percent, Islamabad requires to provide almost $2 billion against its shareholding and Russia needs to come up with $700-800 million investment as per its 26 percent shares. However, the takeaway of the visit is the resolution of both sides to resolve each other’s concerns on some of the leftover clauses of the shareholding agreement draft in future bilateral interactions.

Both the parties would now formally hold negotiations in Islamabad from the week starting November 8, 2021. Top sources said that the incompetence of the county’s Inter State Gas System (ISGS) has led to the failure of talks on Shareholding Agreement as it hired a new law firm at the eleventh hour just prior to the legal talks on the shareholding contract. "The new law firm was not well prepared."

The delay in finalization of the shareholding deal will cause a delay in the initiation of the project of paramount importance. Now Pakistan is left with no option but to keep the talks on fast track in the days to come, so that both the sides could formally sign the shareholding agreement somewhere in next month of November. Otherwise, the project would get delayed, which the country cannot afford. Under the original program, the PSGP is to be completed, executed and commissioned in 2023-24.

The project is meant to transport 1.6 bcfd from Karachi to Kasur (Lahore) to have access to the load center of Punjab. The new LNG terminals, one is being set up by Tabeer and other one by Energas, are aligned with the completion of the Pakistan Stream Gas Pipeline Project. And in case the PSGP is delayed, the new LNG terminals will land into deep trouble.

However, the press release issued by the Petroleum Division here on Thursday night clearly says that the parties agreed to continue working on the draft SHA during the next week, meaning that talks remained inconclusive.

The press release says that Pakistan and Russia have successfully concluded the 4th Russia Pakistan Joint Technical Committee meeting in Islamabad on 28th October, 2021. The parties discussed the draft Shareholders Agreement (SHA) of the Pakistan Stream Gas Pipeline Project (PSGP). The Pakistan side technical committee was headed by Dr Arshad Mahmood, Secretary Petroleum Division, and Ministry of Energy. The meeting was also attended by senior officials of the AG's Office, Ministry of Foreign Affairs, Ministry of Law & Justice, Ministry of Finance, SECP, OGRA, ISGS, GHPL and other officers from the Petroleum Division.

The Russian side arranged a meeting with the financial advisers (led by banks). The parties exchanged their views on the global best practices for financing similar infrastructure projects, their experience in the Asian and global markets. The parties agreed to continue working on the draft SHA during the next week. The parties further agreed to resume negotiations in Islamabad from the week starting 8th November, 2021. The Russian side appreciated hosting the meeting in a cordial atmosphere and support of the Pakistan team in concluding the key issues of Shareholders Agreement.