Pakistan, Russia Sign Deal To Build Karachi-Lahore Gas Pipeline

Pakistan, Russia Sign Deal To Build Karachi-Lahore Gas Pipeline
WikiImages / Pixabay

Russia has taken yet another step in its ongoing pivot away from India and towards Pakistan.

In another clear sign of its new diplomatic direction on the subcontinent, Russia signed an agreement on Friday with Pakistan to construct a lengthy gas pipeline from Karachi on the Arabian Sea all the way to the eastern city of Lahore.

ExodusPoint Adds 4.9% In 2021 On Rates Volatility [Exclusive]

Michael Gelband's hedge fund ExodusPoint ended 2021 on a strong note after its Rates strategies contributed 1.16% to overall performance in the month. According to a copy of the fund's December update to investors, which ValueWalk has been able to review, the ExodusPoint Partners International Fund Ltd rose by 1.95% during December, bringing its year-to-date Read More

According to multiple media sources, Russian Energy Minister Alexander Novak and Pakistani Petroleum Minister Shahid Khaqan Abbasi signed the agreement at a ceremony observed PM Nawaz Sharif and broadcast live across Pakistan.

At a presser after the signing ceremony, Pakistani government officials noted that the new North-South gas pipeline project would be built by Russian firm RT Global Resources (a holding company of Russian state-controlled Rostec).

More on Russia building new gas pipeline in Pakistan

The more than 1,100-kilometre pipeline will have a capacity of 12.4 billion cubic meters per year, according to Friday’s statement, and will connect liquefied natural gas (LNG) terminals in Karachi with those in Lahore.

Based on the new intergovernmental agreement, construction of the pipeline is scheduled to be finished by late 2017. The north-south pipeline will reach maximum capacity by early 2020, according to a statement from Russia’s Energy Ministry. The Russian statement also noted that Rostec State Corp. would invite foreign investors such as China to participate in the project.

Russia is studying funding for the project from Russian and Chinese development banks. A firm to be set up by investors will own and operate the new Pakistani pipeline over its 25 year lifetime, according to the statement.

The 12.4 billion cubic meters of gas per year that can be transported by the new gas link represents close to 30% of Pakistan’s current gas consumption

According to a senior government official, Russia is putting about $2 billion into the pipeline, and its first phase should be completed by December 2017.

Analysts point out that this new Russian investment in Pakistan is related to Putin seeking new allies to move beyond the international isolation caused by its aggressions in Ukraine, and Russia’s recent military build up in Syria is adding fuel to the fire.

Keep in mind that the new deal with Pakistan is a result of over a decade of discussions about possible gas-pipeline projects.

Of note, Russia has been the largest supplier of weaponry to India for many years. That is clearly changing, as Putin is clearly pivoting towards Islamabad as New Delhi modernizes and moves closer politically to the U.S,. and Europe.

Russia announced back in June of this year that it had lifted its arms embargo on Pakistan and was holding talks on selling combat helicopters to the Pakistani military.

Following the announcement, Prime Minister Nawaz invited Russian companies to invest in Pakistan, especially in the energy sector, and take advantage of the business-friendly policies of the government.

Pakistan is seeking long-term solutions to its chronic energy crisis that has hurt economic growth, and has resulted in years of near-daily power electricity black outs to various parts of the country.

 Statement from Russian energy minister

“Construction of the North-South pipeline brings trade and economic cooperation of Russia and Pakistan to a new level,” Russian Energy Minister Alexander Novak noted in Friday’s statement. Novak was in Islamabad on Friday to sign the new intergovernmental agreement for the gas pipeline.

Updated on

No posts to display