Pakistan Stream Gas Pipeline Project: Pak-Russia Strategic Partnership

Flagship project of Pak-Russia strategic partnership has been inked last week when a deal was signed for laying the Pakistan Stream Gas Pipeline (PSGP), formerly known as North South Gas Pipeline. Since indigenously produced natural gas contributes only 38% to Pakistan’s energy supply, huge shortfall is bridged by importing gas, especially during demand peaks in winter. Global paradigm is shifting from unipolar era to multipolar scenario. Coming a long way from foes of Cold War to friends of today, Pakistan and Russia have entered into a mutually-beneficial relationship.

The project involves construction of 1122 KM high pressure gas transmission pipeline from Port Qasim, Karachi to Kasur in Punjab province. Objective is to transport regasified liquefied natural gas (RLNG) to cater the gas shortage for industrial and domestic consumers. Earlier, Russia with 85% cost sharing had to build the pipeline on the basis of build, own, operate and transfer (BOOT) model and transfer the ownership to Pakistan in 25 years. Revision of the project came after a recent decision of the Supreme Court of Pakistan that made available the funds on account of Gas Infrastructure Development Cess (GIDC). Therefore, the revised and renamed Pakistan Stream Gas Pipeline Project envisages 74% contribution of capital by Pakistan and 26% by Russia with estimated cost of US$ 2.2 billion and transportation of 1.6 billion cubic feet gas per day. Both sides have also agreed to execute the project through a special purpose company incorporated in Pakistan. Pakistan has ensured that the companies involved in the project are not blacklisted and have the requisite experience for this mega pipeline. The ETK Company of Russia has rich experience to lay down over 4000 KM pipelines as well expertise in supplying the related equipment of pipelines and compressors.

Besides contributing to meeting the energy shortage, the project would optimize the utilization of Russian material, equipment and resources with the purpose to enhance technical and operational capacity of Pakistani companies as well as human resources through mutual working and training. PSGP would certainly beef up the existing gas infrastructure to transport additional large volumes of gas supply from southern to northern regions of Pakistan.

Vigorous work and extensive due diligence by the Energy ministry of Pakistan has paved the way for this project. Under the leadership of Mr. Omar Ayub Khan, milestones achieved by the energy ministry are fabulous. Substantial developments in the CASA-1000, TAPI project and Alternative and Renewable Energy Policy-2020(ARE) are already there before the finalization of Pakistan Stream Gas Pipeline Project. The ARE policy aims to enhance the share of alternative and renewable energy to total supply in Pakistan from existing 5% to 30% by 2030. A big shift in the energy policy has been registered under the PTI government in reaction to dwindling gas reserves and heavy reliance on thermal energy by previous governments. Efforts to export surplus electricity during winter to Central Asia under CASA-1000, reservations shown over ‘gas delivery points’ and ‘gas price’ clauses in TAPI and revision of Pakistan’s shareholding from 15% to 74% in PSGP are glaring examples how national interest gets precedence in current regime.

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