Gawadar LNG terminal with 711-km-long pipeline approved

[Salman]

Gawadar LNG terminal with 711-km-long pipeline approved


ISLAMABAD: The economic coordination committee (ECC) that met here on Thursday with Finance Minister Senator Ishaq Dar accorded approval to the much talked but strategic Gawadar LNG terminal along with 711 kilometers pipeline up to Nawabshash.

The meeting also approved support price of Rs3,000 per 40 kg for base grade 3 cotton.However coming to the approval of strategic Gawadar LNG terminal, the top official who attended the ECC meeting told The News that Iran has earlier been told that Pakistan is going to initiate the laying down of 711 kilometers pipeline from Gawadar to Nawabshah as a part of LNG import project to be installed at Gawadar port and whenever the US sanctions imposed on Iran in the wake of its nuclear ambitions are over, the pipeline will be extended by 70 kilometers to Iranian border and would become IP gas line.

To avert the penalty of $2 million per day from January 1, 2015 to be imposed by Iran after failure to lay down by December 31, 2014, the 781 km pipeline from Iranian border to Nawabshah under the gas sales purchase agreement (GSPA) signed between the two countries, Pakistan already invoked the clauses pertaining to force majeure and excusing event written in the agreement in view of the US sanctions that have factually impeded Pakistan from initiating the laying down of the pipeline.

The top official sources said that after the approval of the pivotal project by ECC, secretary petroleum and natural resources Mr Abid Saeed is to visit Iran soon to sensitise the authorities in Iran that Pakistan is serious on IP project, but it does not initiate it as IP gas line from Iranian border because of the economic sanctions.

However, Iran will be told that pipeline under LNG project to be laid down from Gawadar to Iran will be having the specification of IP gas line. This means whenever, sanctions are over, the same pipeline will be extended to Iranian border and will be declared as IP gas pipeline.

The official said that LNG project along with pipeline will be initiated under two options that include through the tender process or under government-to-government arrangement with any of the country (China, Japan and Russia). The minister said that the companies from China, Japan and Russia have also shown interest in building the LNG terminal at Gawadar port and lay down the pipeline.

The pipeline will require $1 billion and over $2 billion will be needed to construct the terminal with LNG handling and re-gasification facilities and to erect large LNG storages facilities.

“This will be the second LNG terminal as the first fast track terminal is being constructed by Engro’s ETPL (Elengy Terminal Pakistan Limited) at Port Qasim, which is scheduled to be completed by March 31, 2015 but we are hoping that the terminal will be completed by December this year,” the minister said.

Mentioning the LNG project at Gwadar, the official said, whenever the US sanctions are lifted, this Nawabshah-Gwadar pipeline will be extended backward from Gwadar to MP 250, a point at Pak-Iran border for the import of Iranian gas.

The Gwadar-Nawabshah pipeline will have the same specifications with diameter of 42 inches that is proposed for the Iran-Pakistan (IP) gas pipeline. According to officials, since Pakistan is unable to lay down the 781-kilometre-long pipeline from the Iran border to Nawabshah because of Pakistan’s inability to arrange foreign funding, it has been decided to lay down the pipeline from Gawadar to Nawabshah under the G2G arrangement and through tenders that will transport at least 500 mmcfd after re-gasification of imported LNG. After US curbs are over, this pipeline will be connected with Iranian border and import 1 billion cubic feet gas per day. This means that the capacity of pipeline to transport the gas will be at 1.5 billion cubic feet gas per day.

The LNG terminal to be constructed at the Gwadar Port will have handling capacity of 690 mmcfd and in addition, large LNG storage depots at Gwadar will also be constructed from where after re-gasification, gas will be transported to Nawabshah to be injected into the national gas network.

The ECC meeting dilated at length on the proposal submitted by Ministry of Textile and Industry for allowing support price for seed cotton 2014-15 Crop. The support price recommended by Agriculture Policy Institute (API) of Rs3,000/- per 40 kg for base grade 3 cotton was approved to benefit the farming community. The Trading Corporation of Pakistan (TCP) will accordingly procure one million bales of cotton at the support price.

Finance Minister said,” the Government is aware that the recent floods have badly affected a large part of the agriculture sector. We are cognizant of difficulties faced by our farmers and we shall fully support them in this hour of need.”

The ECC also approved the GAWADAR-NAWABSHAH LNG Terminal and Pipeline Project under which a pipeline system of 700 km from Gawadar to Nawabshah, with 42 inch diameter pipeline which shall be laid and 2 compressor stations constructed. The terminal will have the capacity to handle up to 500 mmcfd of gas. Interstate Gas Systems (Pvt) Limited (ISGS) will be authorised to execute the implementation of the project.

Finance Minister advised the Ministry of Petroleum and Natural Resources to finalize the funding plan preferably on Government to Government basis or BOT/BOO basis.

The ECC also considered and approved with amendment the proposal submitted by Ministry of Industries and Production for Determination of local manufacturing status of machinery, equipment and other capital goods (Energy Sector) in light of the 2014-15 Finance Bill. Further, it was also decided to facilitate local manufacturers and provide them a level playing field.

Accordingly a working committee is to be formed by the Federal Board of Revenue with representation from Ministry of Industries/National Tariff Commission, Engineering Development Board (EDB) (EDB), Board of Investment and local manufacturers of energy equipment to review whether appropriate incentives can be offered to manufacturers to address their grievances and enhance their competitiveness for increased local and export sales.