Memorandum of Understanding for New Gas Pipeline.
17th July 2021.
A Memorandum of Understanding was signed on Thursday between Pakistan and Russia after a long negotiation. The Head of Terms of shareholders signed by both states is of building a 1,100 km long gas pipeline connecting Port Qasim in Karachi to Lahore by the end of 2023 with the budget of $2.5- 3 billion.
Dr. Arshad Mehmood of Petroleum Division Secretary and Alexander Tolparov, Deputy Director of Department of Foreign Economic Cooperation and Fuel Markets Development of Russian Ministry of Energy were present there to sign the agreement under the legitimate guidance of Barrister Asghar Khan of Lincolns Law Chamber and Zaheer Riaz of M/O Ordignum. A joint technical committee agreement was also signed by both parties for the implementation of the Pakstream Gas pipeline.
Both the parties agreed upon 74: 26 shareholding but Russia was given the opportunity to back off or increase its share by 49pc if the project is not feasible or prolific for the state but in either circumstance, Pakistan will entertain the majority shares.
It was decided that the tariff will be collected on a cost-plus basis. The foreign exchange components that are not available in Pakistan will be imported and the funding will be arranged by the Russian side for steel, pipelines, and other related products. The agreement for concession will remain under effect for 25 to 30 years.
The output or throughput of gas quantity is not promised but the tariff payments to Russian authorities will be confirmed. The maintenance of the project and operations generated after the construction will be taken care of by the Sui gas companies who were sent abroad for training purposes during the construction time period.
The next process will be of signing different agreements related to the construction. In the Meantime Pakistan will arrange money worth of Gas Infrastructure Development Cess and Russia will complete the front-end engineering design. Both the parties also viewed the draft of the risk mitigation strategy to finalize it.
The technical studies analysis on FEED was presented by Russian which impressed Pakistani as well. Both parties agreed on meeting within 30 days to discuss technical information and decide the time and format of the event.
Please contact the Legal Research Institute of Pakistan for further assistance.