Russia might begin the ‘Pakistan Stream gas pipeline project’ in future

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Frontier India News Network
Frontier India News Network
Frontier India News Network is the in-house news collection and distribution agency.

Russian Energy Minister Nikolai Shulginov said that Russia expects to sign a shareholder agreement to implement the Pakistan Stream gas pipeline project in the near future. The project was discussed during negotiations between Pakistani Prime Minister Imran Khan and Russian President Vladimir Putin on February 24, the day Russia launched a special military operation in Ukraine.

Pakistan Stream project involves the construction of a 1,100 km main gas pipeline from the southern ports of Karachi and Gwadar to northern Pakistan, to the metropolis of Lahore and surrounding areas. The planned capacity is 12.4 billion cubic meters per year, and the cost of implementation is estimated at $2.5 billion.

Regasification terminals in the southern ports and docking with the future Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline were considered as sources for filling the pipe. Rostec State Corporation is designated to implement the project. Pakistan is supposed to get a controlling stake, taking on 85% of the costs and getting the right to manage the gas pipeline for 25 years.

The Russian-Pakistani agreement for the construction of the main gas pipeline, then the project was called ‘North-South’, was signed back in 2015, and by 2020 the ‘North-South’ should have been put into operation. However, the project has not yet entered the actual implementation phase. The parties did not agree on tariffs for pumping gas or ensuring security on the Afghan section of the route.

In March 2021, the agreement was revised, the gas pipeline was renamed ‘Pakistan Stream’, and the capacity was increased to 16.5 billion cubic meters per year. The participation of the Russian side was reduced to 26%, without operational control over the constructed pipe, but was responsible for resolving design issues, engineering, supply and construction works. Pipes and equipment, like compressor stations etc., are supposed to be supplied from Russia so that domestic companies will receive the lion’s share of orders.

The list of Russian participants in the project has changed. Russia will register a company under the Federal State Unitary Enterprise Center for Operational Services of the Russian Ministry of Energy, the Eurasian Pipeline Consortium and the Pipe Metallurgical Company.

In the current geopolitical circumstances, the chances of implementing the project increases dramatically. The pro-American administration in Afghanistan has ceased to exist. The Taliban movement established actual control over the country, which traditionally has close ties with Pakistan. The global gas market has not only recovered from the fall in Covid 2020 but has turned into a seller’s market. Demand for gas is growing, and there is no excess supply on the market. The gas prices are storming record levels. The April futures at the TTF hub in Europe exceeded $1,400 per thousand cubic meters.

Pakistan is densely populated, with about 210 million inhabitants, country. The urbanisation and industrialisation processes in Pakistan are ongoing, resulting in gas consumption over the past 20 years increasing by 2.6 times, from 17 to 45 billion cubic meters. Domestic production does not keep up with such growth, which is only 34 billion cubic meters per year, and it cannot keep up due to the limited resource base, which is no more than 0.4 trillion cubic meters.

Imports cover the deficit. In 2020, Qatar was the leading exporter of gas to Pakistan, about 67%, while supplies from Russia accounted for only 1.6%. By 2030, according to the Energy Center of the Moscow School of Management Skolkovo, the volume of gas imports in Pakistan will almost quadruple to 40 billion cubic meters per year. It is unlikely that constructing a gas pipeline will help Russia to expand its presence in the Pakistani gas market.

The commissioning of the Pakistan Stream will increase the receiving capacity for Qatari liquefied natural gas, thereby removing its additional volumes from the markets of the Asia-Pacific countries like China, Japan, South Korea, Taiwan, etc., which directly compete with Russian liquefied natural gas.


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