SSGC assigned to construct Karachi-Nawabshah gas pipeline

Pakistan and Russia had signed a government to government agreement in 2015 to construct the North-South gas pipeline.

Islamabad: Sui Southern Gas Company (SSGC) has been given the task of finishing the Karachi-Nawabshah gas pipeline by the government as the Russian company RT Global Resources which was originally awarded the contract is facing US sanctions.

Due to threat of sanctions and delays, the government decided to allocate this task of completing the Karachi-Nawabshah portion of the gas pipeline to the SSGC. RT Global will complete the Nawabshah-Lahore portion of the pipeline, once the sanctions end.

Earlier this month Pakistan’s Oil and Gas Development Company Limited (OGDCL) and Russia’s Gazprom International had signed a Memorandum of Understanding (MOU) in Moscow on the 3rd of July which will bring in investment of $3-4b into the country.

Previously, Pakistan has been seeking Rs2b investment from Russia to build the North-South pipeline to be built from Karachi to Lahore for the supply of liqueified-natural gas (LNG). Russia has shown an inclination to invest $8b in the country of which a major chunk will go to the energy sector alongside an offer to export gas as well.

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OGDCL’s agreement with Gazprom will help coordinate and cooperate on a range of diversified investment opportunities. With the signing of this MOU, it is expected that Gazprom will bring its expertise and state of the art technology in reinvigorating production in OGDCL operated fields in the country. Both the companies are expected to work in conjunction on marginal or stranded fields, which would aid in increasing the revenues and production of OGDCL.

Pakistan and Russia had signed a government to government agreement in 2015 on a build-operate transfer (BOT) model to make the North-South pipeline which would connect LNG terminals in Karachi and Lahore.

As per the original agreement, a Russian company is supposed to construct and operate the pipeline for a period of 25 years. For this project, most of the financing will be provided by Russia. Originally, Russia had demanded a tolling fee of $1.2 per million MMBTU for the provision of gas supply to the country, which was then negotiated by the Economic Coordination Committee (ECC). The rate then was decreased to 85 cents per mmbtu.

Both the countries are expected to sign a commercial agreement shortly followed by the groundbreaking ceremony of this project.

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