KARACHI: Pakistan and Russia agreed to finalize the shareholders agreement for the implementation of a $3 billion gas pipeline project next month as their current round of negotiations concluded on Thursday, the Pakistani energy ministry said.
The two countries signed an inter-governmental agreement in 2015 for the construction of the Pakistan Stream Gas Pipeline project, which could carry 1.6 billion cubic feet per day (bcfd) of gas between Karachi and Lahore.
“The parties discussed the draft Shareholders Agreement (SHA) of the Pakistan Stream Gas Pipeline Project,” the country’s energy ministry said in a statement, issued at the end of the fourth Russia-Pakistan Joint Technical Committee Meeting that began in Islamabad on October 25.
The two sides had previously signed the heads of terms of shareholders agreement in July. They also agreed that 74 percent of the project’s shares would remain with Pakistan, while the rest of 26 percent would go to Russia.
“The parties held in-depth discussions covering all major issues pertaining to the SHA in a cordial and congenial environment and developed consensus on key issues,” the statement said.
It informed that the two sides would “resume negotiations in Islamabad from the week starting 8th November, 2021.”
According to the understanding between the two sides, the pipeline will have a 56-inch diameter to cater to Pakistan’s energy requirements for the next 30 to 40 years.
The official cost of the project has not been disclosed, but a petroleum ministry official who declined to be named suggested it could be somewhere between $2 billion to $3 billion.
As the two sides negotiate the agreement, experts question economic viability of the pipeline with 56-inch diameter.
“There are very few pipelines of such diameter in the world and they are usually cross-country pipelines that supply gas from one state to another,” Syed Kamran Ali, an energy consultant, told Arab News.
“The price of the project of such caliber should be around $5 billion. Ideally, under the current situation where there is scarcity of gas, the country should have opted for a 48-inch diameter of pipeline to cater to its long-term requirements.”
However, the energy ministry said both sides exchanged views on the best practices to finance similar infrastructure projects globally.
The pipeline project is viewed as a flagship initiative that can further strengthen bilateral relations between Pakistan and Russia.
The meeting was also attended by senior officials belonging to the Pakistani ministries of finance, foreign affairs and law and justice.
Other participants belonged to the Securities and Exchange Commission of Pakistan, Oil and Gas Regulatory Authority, Inter-State Gas System, Government Holding Private Limited and the Petroleum Division.