Home »Fuel and Energy » Pakistan » RLNG-III pipeline project: ECC for finalising financing plan

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  • Sep 16th, 2017
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The Economic Co-ordination Committee (ECC) of the Cabinet has directed Petroleum Division, Finance Division and Economic Affairs Division to finalise a financing plan of Rs 175 billion for RLNG-III pipeline project (Karachi to Lahore) to be undertaken by M/s SSGCL and M/s SNGPL, well-informed sources told Business Recorder. This decision was taken at a recent meeting of the committee presided over by Prime Minister Shahid Khaqan Abbasi.

Petroleum Division informed the committee that keeping in view the widening gap in demand and supply of natural gas in the country, the Government of Pakistan was aggressively engaged in import of Liquefied Natural Gas (LNG) to bridge gap in gas supplies. Accordingly, without involving any public money, an LNG receiving, storage and re-gasification terminal has been established at Port Qasim Karachi with the capacity of 600 MMCFD, which has been in operation since March, 2015.

Presently, 600 MMCFD re-gasified is being injected into gas transmission system with effect from February 2017, which is being consumed by power, fertilizer, general industry, CNG and cement. On the same pattern as the first LNG terminal, the government-owned company, ie, M/s Pakistan LNG Terminal Ltd, has been tasked to implement the project of 2nd LNG terminal having a capacity of 600 MMCFD, which was scheduled to be completed by August, 2017. Simultaneously, 3rd LNG terminal has also been planned at Gwadar with a 600 MMCFD capacity to be commissioned next year.

Meanwhile, two additional LNG terminals are in the implementation phase with a capacity of 1 BCFD and 600 MMCFD, respectively, and are being developed by two different consortiums with membership of Shell, Qatar Petroleum, ExxonMobil, Total, Mitsubishi, Hoegh, GEl, Engro & Fatima Group, etc. These two terminals of private sector are expected to be commissioned in the second and third quarter of 2018.

According to the Petroleum Division, in order to carry 1.2 BCFD RLNG from two terminals, a dedicated RLNG pipeline project has been completed which was scheduled to be commissioned by second quarter of 2017. However, for transportation of additional quantities of RLNG from other terminals, both Sui companies have been advised to co-ordinate and initiate a necessary action to complete RLNG-III pipeline project before October, 2018. Pursuant to these directions both Sui companies got the project approval from their Board of Directors respectively. They have now requested for arrangement of funds either from Gas Infrastructure Development Cess (GIDC) or loan bearing minimum markup. Both companies have provided a tentative project capital outlay.

Meanwhile, OGRA has advised Sui companies to provide policy guidelines of the project to the ECC as was done for the RLNG-II pipeline project. It was pointed out that in case of RLNG-II pipeline project, the ECC on September 3, 2015 had approved the proposal of bank borrowing to the extent of Rs 101 billion enabling both Sui companies to carry out RLNG infrastructure project, whereas Ministry of Finance was directed to provide a GoP guarantee to arrange financing from commercial banks.

As for provision of funds out of GIDC collection, Section 4(1) of the GIDC Act, 2015 stipulates that the cess shall be utilized by the Federal Government for or in connection with infrastructure development of Iran-Pakistan Pipeline Project, Turkmenistan-Afghanistan-Pakistan-India (TAPI) Pipeline Project, LNG or other ancillary project. Subsequently, under Section 6(1) of the GIDC Act, 2015, the GIDC Utilization Rules, 2015 have been notified in the gazette on March 4, 2016.

Under rule(2) of the said Rules, a high-powered project review board has been constituted which was headed by Finance Minister, including Minister for Petroleum and Natural Resources, Deputy Chairman Planning Commission, Secretary Finance and Secretary Petroleum Divisions tasked to review the projects proposed by Petroleum Division which are duly qualified for funding from GIDC and accord its approval for utilizing GIDC funds.

The Petroleum Division submitted the following proposals for consideration and approval: (i) the funds of Rs 175.510 billion as per project capital outlay schedule in favor of M/s SNGPL and SSGCL may be arranged from the GIDC collections under the provisions of Section IV of the GIDC Act, 201S and the GIDC Utilization Rules, 2015; or (ii) in case, if the funding from GIDC is not available, M/s SSGCL and SNGPL may be allowed to arrange commercial borrowing to the tune of Rs 175.510 billion based on sovereign guarantee provided by Ministry of Finance for undertaking the RLNG-III pipeline project as per project capital outlay schedule.

After a detailed discussion, the ECC directed Petroleum Division, Finance Division and Economic Affairs Division to examine the financing options of the project, incorporating a mix of local loans, financing by IFIs and loans under a sovereign guarantee. Once finalized, financing plan would be submitted to ECC for approval.



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