First day of technical talks on PSGP: Pakistan, Russia discuss structure of project, pre-FEED studies

ISLAMABAD: Pakistan and Russia here on Tuesday started the three-day technical parleys on the 1,040-kilometer Pakistan Stream Gas Pipeline (PSGP) to be laid from Karachi to Kasur (Punjab), which will help cater to the increasing LNG demand in the country. Both sides, during the first day of talks, discussed the structure of the project and the Russian side presented its pre-FEED (Front-End Engineering Design) studies for deliberation in the meeting, a senior official who was part of the meeting told The News.

The Pakistan side said in the meeting that OGRA's current license was valid for the project implementation, but the Russian side said that the license has been acquired by the Inter-State Gas system as it should be in the name of a Special Purpose Company (SPC), which will be responsible for implementing the project.

The gas companies’ representatives in the meeting shared their landmark achievements and capacity in handling pipeline projects referring to the laying down of RLNG-I and RLNG-II pipelines (augmentation of existing transmission from south to north) and their capacity to maintain the operation and maintenance also.

The sources said that proper talks will begin from today (Wednesday) and after three days the outcome of the talks will appear. They said that both sides will also discuss the parameters needed to implement the project and once they are finalized, both technical sides will decide about the diameter of the pipeline at a later stage.

Both sides in the remaining days of talks will discuss the project implementation and finalise the 1,040-kilometer-long pipeline’s specifications. A 13-member Russian technical team (seven members who reached Islamabad here on Tuesday morning and six from Moscow through video) participated in the talks.

However, a team of technical experts from the Inter-State Gas System (ISGS), Sui Northern Gas Private Limited (SNGPL), Sui Southern Gas Company Limited (SSGCL) and National Engineering Services Pakistan (NESPAK) took part in the talks and the delegation was headed by Secretary Petroleum during the first half of talks and in the remaining session, the Joint Secretary at the Petroleum Division headed the Pakistan side.

“We will deliberate on the pipeline specifications, diameter, pre-feasibility options and hydraulic specifications, keeping in view the demand and growth of gas in future. However, both sides will be having the option to also hold talks on commercial and legal issues on the sidelines of the technical talks,” a senior official privy to the development told The News.

They said after the talks, both sides would be able to set out with the direction of the mega project and once the technical specifications of the project would be finalised, then its cost could be determined and work on project financing would be initiated.

Both sides would also deliberate on the diameter of the pipeline along with the number of compressors to be installed, which would also help finalise the cost of the project. Both sides have already finalised the Heads of Terms (HoTs), as Russia would have 26 percent and Pakistan would have 74 percent shareholding in the project.

The pipeline would be laid down from Karachi to Kasur (Punjab). The HoTs broadly covered the corporate, governance, financing and contractual structure of the project and according to the HoTs, the Special Purpose Company (SPC) is to be incorporated in Islamabad and the Russian nominated entity, PAKSTREAM LLC would be having not less than 26 percent shares.

However, a Pakistani nominated entity, Inter-State Gas Systems (Pvt) Ltd. would have the maximum share of up to 74 percent shares. The board representation would be according to shareholding of each party and transportation tariff to be approved by the OGRA, funding arrangements would be ensured through local currency component and the lead role would be ISGS, which would explore finances from the Finance Division of Pakistan, local commercial banks, etc.

The Russian nominated company PAKSTREAM LLC would arrange the foreign currency component and explore financing options, including bilateral financing arrangements, IFIs, foreign banks.