Four-day talks on PSGP successfully conclude: Deal done on $2.5b gas pipeline with Russia

ISLAMABAD: In a major breakthrough, Pakistan and Russia here on Thursday successfully concluded the talks and signed the Heads of Terms (HoT) and Shareholders Agreement (SHA) on the country’s most strategic project of 1,100-kilometer Pakistan Stream Gas Pipeline (PSGP) from Karachi to Kasur. The project’s cost has been estimated at $2.5 billion.

All the heads of terms presented by Russia were altered to make them acceptable and for the sake of more clarity and then both sides signed them.

“Russia will have 26 percent shares in the project but will have no sovereign guarantee from Pakistan on the rate of return. Pakistan will be having 74 percent shares in the project, which is why the Managing Director (MD) of Special Purpose Company (SPC) will be appointed from the Pakistan side and Chief Operating Officer will be from the Russian side. The SPC will be responsible of running the PSGP,” one of the participants of the four-day talks told The News.

The completion of the Pakistan Stream Gas Pipeline will enable the country to import and transport over an additional 1.5-2.5 billion cubic feet of gas per day from Karachi to Kasur (Punjab). Currently, Pakistan has the capacity to import 1.2 bcfd, which can go up to 1.5 bcfd if the additional capacity of both FSRUs at PGPL and Engro terminals is used. However, after completion of the PSGP, the two new terminals --- one by Energas and other one by Tabeer -- would also come on stream.

The diameter of the pipeline will be 56 inches. Russia has matchless expertise in laying down the 56 inches diameter pipeline. Russian experts will also teach and train technical human resources of local gas companies — Sui Southern and Sui Northern on how to lay down the 56 diameter pipeline.

Surprisingly, Special Assistant to PM on Power and Petroleum, Tabish Gauhar, has not been part of the four-day talks at any stage and even was not visible during the signing of Shareholders Agreement and Heads of Terms. Tabish Gauhar had opposed the PSGP on the ground that it would get delayed by one and a half years and Pakistan wanted the pipeline in 2023. He was of the view that the PSGP would be costly whereas local gas companies could build the pipeline of 42 inches diameter as Sui Southern and Sui Northern have experience of laying down 15,000-kilometer pipelines of 42 inches diameter. Tabish wanted to build an alternate pipeline with a consortium of both gas companies and PAPCO, a company of PARCO.

However, after four days of talks, both the sides agreed to hold joint technical sessions within 30 days to exchange information on the project implementation status, set technical specifications and prepare a project roadmap after the signing of the SHA. The format and time of the event will be mutually agreed by the nominated entities.

During the course of the meeting, both sides reaffirmed the commitment to implement the project vis-i-vis the emerging energy security scenario of Pakistan in an expeditious manner. Both sides harmonized on the broad understanding to adhere to the terms of IGA as amended from time to time and ink the shareholders agreement within the ambit of terms agreed under the IGA.