Pakistan Stream Gas Pipeline Project

Pak-Russia finalise Heads of Terms for PSGP

Pakistan and Russia have finalised the reworded Heads of Terms for Pakistan-Stream Gas Pipeline (PSGP) project after detailed deliberation.

The project envisages the construction of 1040 kilometers of gas pipeline from Port Qasim to Kasur, to be completed by 2023 at an estimated cost of $ 2.5 billion. The infrastructure of 42 to 56 pipeline diameter, costing US $ 2.25 -2.5 billion, will ensure enhanced energy security of Pakistan. The project will secure sustainable gas supply infrastructure for next 40 years. This will be the most essential conduit between installation of new LNG terminals and industrial growth of Pakistan. Oil and Gas Regulatory Authority (Ogra) will determine the tariff of gas pipelines. The raw material of pipeline will come from Russia whereas local companies will lay the pipeline. Pakistan will be having 74 percent shareholding and Russia 26 percent.

According to sources the Russian side wanted security of its investment with a guaranteed rate of return of 18 percent on its 26 percent investment. However, the Government of Pakistan clearly told the Russian side that there will be no take or pay mode and no offtake guarantee also. However, the Russian side was told that OGRA will determine the tariff and the return will be ensured on the asset base.

They were also told that the tariff regime will be on cost transfer pricing mechanism wherein aggregate of prudent expenses incurred in connection with the regulated activity will form revenue requirement in respect of licensee. And the revenue requirement will be based on the cost of gas, operating expenses, return on regulated assets base, federal and government taxes, levies if any and transportation charges.