by Khalid Mustafa in The News, June 7, 2017
ISLAMABAD: The government has virtually put in the cold storage the much-touted $1.6 billion strategic and paramount IP project in favour of Gwadar-Nawabshah LNG terminal & Pipeline Project (GNGP), which the incumbent regime had kicked off, top official sources told The News.
Under GNGP, gas pipeline of 700 kilometres was to be laid down and two LNG terminals were to be constructed at the Gwadar Port.
The decision to shelve the project will certainly irritate Iran and in return it is feared that Tehran will invoke the penalty clause and will penalise Pakistan @$1 million per day. Pakistan and Iran had signed the Gas Sales Purchase Agreement (GSPA) in 2009 in era of Pakistan People’s Party. On top of that, the decision will annoy Beijing as Chinese company was given the the contract of GNGP under government-to-government arrangement. China had earmarked the 85 percent of the funding for the project.
Under the IP gas line, Pakistan could not arrange the funding for the IP project because of the US and UN sanctions imposed on Iran and no international firm and donors were ready to finance this project and owing to this every reason, Pakistan sought the force majeure to avoid $1 million per day penalty. However, Iran did not buy the argument.
In order to pacify Iran, Pakistan said that it is very serious in the IP project and to this effect it has started initiating the Gwadar-Nawabshah LNG pipeline with the same specification agreed with Iran and the said pipeline will later on be called as the IP gas line.
“Iran did not charge the penalty which was due from January 1, 2015,” the official said. “So much so, Iran had agreed to review the gas price downward under the IP gas line and to this effect for the last one year, Pakistan’s official team is waiting for green signal from the top man of the country to visit Iran and start the talks for downward gas price. So far no permission has been granted to the officials of the Ministry of Petroleum & Natural Resources for the reasons best known to them,” the official said.
“The government has abandoned the project under pressure from an important Gulf country,” sources insisted. However, Federal Minister Shahid Khaqan Abbasi denied any pressure from any country and said the government has deferred the project as it wants the private sector to invest in the LNG terminals and import LNG in the country and to this effect, both new LNG terminals are being erected. If private sector succeeds, then the government may abandon the project.
“We have deferred it as private sector is going to install more LNG terminals with plan to import 1.2 billion cubic feet per day: One is being built by Global Energy Infrastructure Limited (GEIL) and other one is being built by a consortium of companies such as Engro, ExxonMobile and others. And some more projects are being erected by private sector.
Currently Engro LNG terminal is importing 600 mmcfd LNG and a new LNG terminal being built by PGPL will also come on stream with months’ time with capacity to import 600mmcfd LNG. In addition, under $8 billion TAPI gas line project, Pakistan will be importing 1.35 bcfd in 2020 from Turkmenistan.
More importantly the decision will also annyoy Beijing as Pakistan and China had initialed the agreement under government-to-government deal to build 700-kilometre gas pipeline to be laid down from Gwadar to Nawabshah at the cost of $1.35 billion after Price Negotiation Committee (PNC) had finalised the cost of the project.
According to documents available with The News the project was to be constructed with 85 percent financing from China and 15 percent from government of Pakistan, and the price at which the gas line will be laid down is much below from the estimated cost. ECNEC approved the project in September, 2017 since the project is being delayed and 9 months have elapsed. “China Petroleum Pipeline Bureau has written many letters to the government for formal agreement which was due to be signed in Novemebr 2016, but the government did not respond positively.”
The project of Gawadar-Nawabshah LNG pipeline, the official said, is ready to take off as its route is finalised and marked because the survey of the route and FEED (Front End Engineering Design is already completed. China Petroleum Pipeline Bureau has been waiting since long for the formal agreement with government of Pakistan for initiating the project, but the government seems to be unmoved for reasons best known to it. https://www.thenews.com.pk/print/209067-Govt-shelves-16-bn-IP-project
Comments are closed.