Khan Govt. Looks at ‘Make in Pakistan’ North-South Gas Pipeline

Prime Minister Imran Khan’s government may give its nod to the long awaited North-South Gas Pipeline project as a ‘Make in Pakistan’ undertaking if all the I’s are dotted and T’s are slashed –sources say it’s in the works.

If this happens, it would be a bungee jump albeit leap of faith for the country’s thought leaders.

The country’s top financial and economic body, Economic Coordination Committee (ECC) had approved the project in 2016 on BOOT (build–own–operate–transfer) model –this is usually used in public–private partnerships. BOOT remains as the model regardless of who gets to do the project –local or foreign or a mix.

Russia’s state-owned Gazprom, an energy company, has been the frontrunner (ever since the two cold war adversaries –during the 80s became friends in the unipolar world). Gazprom’s price tag of $2.7 billion plus other conditions is up north though for the strategic project, says a source, “conditions notwithstanding”, the source adds.

The 42-inch cross-country pipeline would run north-south from Karachi to Lahore on the eastern side of River Indus.

Existing pipelines connecting Karachi with Lahore for the transportation of regasified liquid natural gas (RLNG) have been fully utilized.

And Pakistan is setting up more Liquefied Natural Gas (LNG) terminals at Karachi as energy demand grows.

More transportation infrastructure (pipeline) is needed to supplement the lead-lag in demand-supply.

A local outfit, the Sui Northern Gas Pipelines Limited (SNGPL), which is involved in the supply of gas in northern part of the country said it’s looking at building the 1100km-long pipeline at a cost of $1 billion, according to a local report. “There would be at a substantial saving of $1.7 billion, if the $2.7 billion foreign price tag is compared with”, says an expert.

SNGPL is said to have the capability (may need capacity building) to handle the project –it has already built one and saved substantial monies of the national kitty by constructing a gas pipeline of a similar capacity.

North-South Gas Pipeline: Comment from an Observer

What could tilt the billion dollar decision in favor of ‘Make in Pakistan’?. Several, say some observers and professionals in background discussions. Main takeaways they say could be:

  1. Localization, price tag and ownership. 2. Project risk abatement and mitigation, country risks: internal security and geopolitical factors. 3. Takeoff of local expertise, skills, employment is one. The other is engineering, construction and financing subdomains’ institutional development, including raising bond, equity participation, mobilization of local monetary resources.

The petroleum ministry is said to have ratified the “Make in Pakistan” plan “ostensibly to serve the larger national interest as well as to benefit the national exchequer”. Pakistani companies would be allowed to participate in the international bidding process instead of nominating ‘favorite’ foreign firms for select bidding.

That would be a game-changer if local outfits singly or in consortium are allowed to compete. An affirmative scoring of certain percentage going in favor of local outfits (as a federal guideline) could be an added plus.

Time is of the essence given the growing gas demands of the country amid changing dynamics of geopolitics in the region.

The proposed plan envisages Phase-I completion of the pipeline by December 2022 and phase-II by December 2023.