Energy-starved Pakistan likely to sign $2 billion pipeline deal with Russia

ISLAMABAD: Energy-starved Pakistan is likely to sign a $2 billion deal with Russia for laying a Liquefied Natural Gas (LNG) pipeline from Karachi to Lahore, a sign of increasing ties between the Cold War-era adversaries.

The deal is expected to be signed next month during Prime Minister Nawaz Sharif's visit to Moscow to attend a summit of the Shanghai Cooperation Organisation (SCO).

"We are trying to sign an LNG pipeline accord with Russia in a government-to-government arrangement during the visit of prime minister to Moscow," Petroleum Minister Shahid Khaqan Abbasi was quoted as saying by The Express Tribune.

During the SCO meeting, Pakistan and India are expected to get permanent membership of the SCO regional forum.

The paper reported that in addition to financing the pipeline, Russia has also agreed to export LNG in a bid to help ease energy shortages in Pakistan and this issue will come up for discussion during the bilateral talks.

"The Russian side is very positive about helping Pakistan in tackling the energy crisis," an official said. "It will start LNG exports in 2016."

The two sides have already signed an initial deal in the form of a protocol and finalised an agreement during earlier talks in Moscow.

Under the partnership, Russia will provide $2 billion to lay a 1,100-km pipeline from Karachi to Lahore for supplying LNG that will be imported from Qatar and other countries. Pakistan will award the contract to Russia without inviting bids.

It is the first major economic cooperation deal since the 1970s when former Soviet Union helped to set up a steel mill in Karachi and also supported Oil and Gas Development Company.

Relations between the two countries are improving after 40-year of hostility during the Cold War in which Pakistan was in the anti-Soviet Union camp and had been instrumental in the Soviet pullout from Afghanistan in 1980s.

Pakistan is currently working on two LNG pipelines as an alternative to the shelved Iran-Pakistan gas pipeline project including the Gwadar pipeline and the south pipeline from Karachi to Lahore.

The government has signed a deal with China for the award of the $3-billion Gwadar LNG pipeline and terminal project.

An LNG terminal has started functioning in Karachi with the first LNG shipment brought by the private sector at the end of March.