TAPI project gets special concessions

  • Caretaker government exempts TAPI Gas Pipeline project from the Open Access Regime, OGRA Gas (Third Party Access) Rules 2018 and the Pakistan Gas Network Code

ISLAMABAD: The caretaker government is said to have exempted Turkmenistan Afghanistan-Pakistan-India (TAPI) Gas Pipeline project from the Open Access Regime, OGRA Gas (Third Party Access) Rules 2018 and the Pakistan Gas Network Code, besides standard waiver of immunity in line with international precedents to be included in the Host Government Agreement (HGA), sources close to Secretary Petroleum told Business Recorder.

These special concessions were approved by the Cabinet Committee on Energy (CCoE) headed by caretaker Minister for Power and Petroleum, Muhammad Ali last week of last month but its minutes were approved by the caretaker Minister three weeks after the meeting by incorporating desired changes. Sharing the details, sources said, Petroleum Division briefed the CCoE about the TAPI project.

It was stated that TAPI Gas Pipeline project was aimed to bring natural gas from the Galkynysh and adjacent gas fields in Turkmenistan to Afghanistan, Pakistan and India.

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In order to strengthen the common understanding made by the TAPI parties and further to implement the project, Inter-Governmental Agreement (IGA) and Gas pipeline Framework Agreement (GPFA) were signed on December 11, 2010.

The GPFA had provided certain protections and facilitation to the project company for the execution, implementation and operation of the pipeline for the life of the project. Moreover, given that TAPI was a trans-national pipeline project, Government of Pakistan (GoP) had agreed, under the GPFA, to adopt and implement uniform legal and regulatory framework for the project.

As per the GPFA, Afghanistan and Pakistan are required to execute Host Government Agreements (HGA) with TAPI pipeline company Limited (TPCL), the project company. The Heads of Terms of the Host Government Agreement were signed between the GoP and TPCL on March 12, 2019.

Petroleum Division was in the process of negotiating the full form of HGA with TPCL under the TAPI HGA, Government of Pakistan and its authorities/ institutes/ organisations would allow certain concessions and permission to TPCL including travel concessions covering visas and permits, investment protection, facilitation to grant authority permissions covering approval/ NOCs, etc., to facilitate implementation of the project, uninterrupted transit of gas, freedom of contract, excess pipeline capacity utilisation, licence issuance, transportation tariff approval, provision of land, authorization to remit foreign currency, security protocol/ agreement, tax concessions, change of law protection, etc.

The HGA would authorise the TPCL to implement and operate Pakistan segment of the TAPI project for next 30 years. In this regard, the GoP draft of the HGA, after incorporating the comments from all concerned Ministries/ government entities followed by a comprehensive review by M/s Freshfields Bruckhaus Derringer (int. legal counsel of Petroleum Division) was finalised and shared with TPCL in March 2023.

TPCL shared its comments with GoP on July 22, 2023. TPCL has identified certain elements of the HGA which were critical in nature for international lenders/ financiers as they made the TAPI project un-bankable. In order to take all concerned ministries/ government entities, i.e., Ministries of Foreign Affairs, Finance, Interior, Commerce, Law & Justice, State Bank of Pakistan, Federal Board of Revenue and Board of Investment) on board, three inter-ministerial meetings were held on 8,9, and 17 August, 2023, respectively.

Petroleum Division apprised the CCoE that in view of the discussions held in the Inter-Ministerial meetings, there were certain matters related to Oil and Gas Regulatory Authority (OGRA) where TPCL desired that the GoP should honour its international commitment given under the GPFA and also agreed in the Heads of Terms of the HGA.

These matters included gas transportation tariff approval, technical standards, third party access and freedom of contract and license under OGRA regulations.

Moreover, TPCL also desired that the State should waive its sovereign immunity under the HGA which has been agreed to at the time of signing the Heads of Terms of the HGA in 2019.

The Office of Attorney General for Pakistan had not offered any comments on waiver of sovereign immunity being a policy decision best placed for further action by the concerned Division to the Federal Cabinet.

Petroleum Division submitted following proposals to the Cabinet Committee on Energy for consideration and approval: (A) issue the following policy guidelines under Section 21 of OGRA Ordinance,2002: (i) in relation to this specific project the transportation tariff as agreed between the parties, i.e., TPCL and GoP shall be treated as final and shall be endorsed by OGRA; (ii) in case of any conflict between the OGRA’s technical standards and international technical standards, the international technical standards shall apply.

OGRA may procure from the licensee, if so required, equivalency in relation to the technical standards applied by OGRA and the international technical standards proposed to be applied in relation to the Project; (iii) exempt the project from the Open Access Regime, OGRA Gas (Third Party Access) Rules 2018 and the Pakistan Gas Network Code; (iv) licence should be issued under Rule 20 of the Natural Gas Regulatory Authority (Licensing) Rules,2002 on such conditions as may be specified in the GoP’s policy guidelines in relation to this project; and (B) grant standard waiver of immunity in line with international precedents to be included in the HGA.

During the ensuing discussion, it was pointed out that office of the Attorney General of Pakistan conveyed its no objection on the proposal.

However, on standard waiver of immunity shown in the summary presented by Petroleum Division to the CCoE a clarification was sought. Petroleum Division clarified that proposals of both summaries presented to Attorney General of Pakistan Office and CCoE were same.

However, views/ comments of stakeholders in the earlier summary were inadvertently mentioned in the latest summary. The CCoE observed that this type of discrepancy should not have arisen as it created confusion while making decision.

Law & Justice Division was of the view that OGRA’s proposal regarding amendments in the OGRA Ordinance, 2002 was not tenable at this point of time which could be catered to by invoking Section 21 of said Ordinance which empowered Federal Government to issue policy guidelines to Authority which would suffice in the instant matter without any further amendment.

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