ECC gives go-ahead for Gawadar-Nawabshah LNG terminal, pipeline project

The economic body also approved support price of Rs3,000 per 40 kilogram for cotton of grade 3


Shahbaz Rana October 02, 2014

ISLAMABAD: In a strategic move, the government on Thursday decided to construct a Liquefied Natural Gas (LNG) terminal at Gawadar and a dual-purpose pipeline aimed at catering to the needs of LNG and imported natural gas from Iran as well.

The Economic Coordination Committee (ECC) of the Cabinet on Thursday gave the go-ahead for the Gawadar-Nawabshah LNG Terminal and Pipeline Project, according to a handout issued by Ministry of Finance.

The LNG terminal will be used for handling import of the resource and will be able handle up to 500 mmcfd of gas per day, according to Ministry of Finance. Chaired by Finance Minister Ishaq Dar, the ECC authorised Interstate Gas Systems Limited (ISGS) to execute the implementation of the project.

Although, the government has not yet officially disclosed the price of the project, it is estimated that the project will cost about $3 billion.

This will be the second LNG terminal in Pakistan with the first being constructed by Engro’s ETPL (Elengy Terminal Pakistan Limited) at Port Qasim. It is scheduled to be completed by March 31, 2015. However, Pakistan has yet to finalise LNG procurement arrangements. It is considering both options for the Port Qasim Project.

Under the plan, a 711 kilometers long pipeline system will be laid down from Gawadar to Nawabshah. The diameter of the pipeline will be 42 inch –the specification that matches with requirements of Pakistan-Iran Gas pipeline. The I-P project has been facing delays due to sanctions imposed by the European Union and the United States against Iran.

If the I-P project sees the daylight in future, the pipeline could be extended by 71 kilometer towards Iranian border for transportation of gas under I-P pipeline project, according to officials of Ministry of Petroleum and Natural Resources. Pakistani authorities have already informed the Iranian government that Pakistan is going to initiate the laying of 711-km of pipeline from Gwadar to Nawabshah as a part of the LNG import project, they added.

Pakistan is hoping to avoid the possible penalties that Tehran might impose on Islamabad if it fails to fulfill the agreement of laying the I-P pipeline by the end of this year.

Pakistan has kept the options of competitive bidding open but in all likelihood the project is likely to be funded by China as part of its heavy investments in return of seeking access to Gawadar port, according to officials.

“The Finance Minister while approving the Project in principle advised the Ministry of Petroleum and Natural Resources to finalise the funding plan preferably on Government-to-Government basis or Build-Operate Transfer or Build-Operate and Own basis”, reads the handout.

According to preliminary unofficial estimates, 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.

Cotton Support Price

The ECC also approved a Rs700 hike in support price for cotton, raising it to Rs3,000 per 40 kilogram cotton of grade 3 aimed at helping farmers from incurring further losses. The cotton is being sold at around Rs2,300 per mond even below the cost of production, according to Ministry of National Food Security officials.

The Trading Corporation of Pakistan (TCP) will procure one million bales of cotton at the approved support price. Finance minister said that the government was 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,” said Dar.

The ECC also approved proposal to determine local manufacturing status of machinery, equipment and other capital goods in the energy sector.

It was also decided that local manufacturers will be facilitated by providing them a level playing field. A working committee will be formed by the Federal Board of Revenue to review whether appropriate incentives can be offered to manufacturers to address their grievances and enhance their competitiveness for increased local and export sales.

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