Russia to invest $2b to build natural gas pipeline in Pakistan

Russia will invest a whopping $2 billion in Pakistan to build a 1,100-kilometre pipeline from southern port city of Karachi to Lahore to transport liquefied natural gas.

“Pakistan and Russia have finalized an LNG pipeline deal in a recent meeting in Moscow and the two countries will sign a government-to-government basis deal next month,” Petroleum Minister Shahid Khaqan Abbasi was quoted as saying by a local newspaper.

Abbasi said that in return for the investment, Russian companies will be awarded the contract to build the pipeline.

“Russia will start its first LNG exports in 2016 and has also offered to sell gas to Pakistan,” he said.

The formal agreement between the two sides is expected to be signed next month, following which Pakistan will also sign a commercial agreement with a Russian firm that Moscow will identify as its preferred contractor to build the pipeline.

According to the agreement, the contract will be awarded without any formal bidding process.

The financing for the LNG pipeline comes as a prelude to Russia’s offer to sell LNG to Pakistan.

Russia is the second-largest producer of natural gas in the world, and is seeking to diversify its export markets after a spat last year with the European Union, its main buyer, over Ukraine.

Russia promised to make investment after relations between the two Cold War rivals increased in recent years.

Several years back, former Soviet Union financed the construction of the state-owned Pakistan Steel Mills in Karachi. The Soviets had also provided oil drilling equipment for the state-owned Oil and Gas Development Company.

Pakistan is working on two pipelines to transport re-gassified LNG from Karachi to the northern parts of the country. The first pipeline will connect Gwadar Port to the main natural gas pipeline hub in Nawabshah, while the second will connect Karachi to Lahore.