Pakistan to Build LNG Terminal, Gas Pipeline

Pakistan to Build LNG Terminal, Gas Pipeline
Pakistan to Build LNG Terminal, Gas Pipeline

In a strategic move, the Pakistani government has decided to construct a liquefied natural gas (LNG) terminal at Gwadar that is likely to be financed by China and a dual-purpose pipeline to cater to the needs of LNG and natural gas import from Iran.

The Economic Coordination Committee (ECC) of the cabinet, in a meeting Thursday with Finance Minister Ishaq Dar in the chair, gave the go-ahead to the Gwadar-Nawabshah LNG terminal and pipeline project, according to a press release issued by the ministry of finance, the Express Tribune reported Friday. Though the government has not yet disclosed the cost of the project, it is estimated that it will need a minimum capital injection of $3 billion.

Under the plan, a pipeline network spread over 711 kilometers will be laid from Gwadar to Nawabshah. The diameter of the pipeline will be 42 inches, the same as that specified for the Iran-Pakistan (IP) gas pipeline.  

They said the government had informed Iran about its intention of laying the 711km pipeline from Gwadar to Nawabshah as part of the LNG import project. Officials express the hope the LNG project may help stave off penalties that Iran could slap on Pakistan for failure to meet the deadline for laying the IP pipeline by the end of this year.

The LNG terminal would be used to import and handle up to 500 million cubic feet of gas per day, said the finance ministry. The ECC has tasked Interstate Gas Systems (ISGS) with executing the plan.

The government has kept the option of competitive bidding open but in all likelihood the project will be funded by China as part of its heavy investment program in return for seeking access to the Gwadar Port, according to officials.

“The finance minister advised the Ministry of Petroleum and Natural Resources to finalize the funding plan preferably on a government-to-government basis or build-operate-transfer or build-operate-own basis,” said the press release.

According to unofficial preliminary estimates, the pipeline will require $1 billion and over $2 billion will be needed to construct the terminal with LNG handling and re-gasification facilities and to install large storage facilities.

This will be the second LNG terminal as the first fast-track terminal is being constructed by Elengy Terminal Pakistan Limited, a wholly owned subsidiary of Engro Corporation, at the Port Qasim, which is scheduled to be completed by March 31, 2015.

Pakistan has not yet finalized LNG procurement arrangements and is considering both options for the Port Qasim project.