China Petroleum Pipeline Bureau signed a gas pipeline deal with Pakistan at a lower price as the Chinese company, has revised the cost of laying the pipeline downwards to $1.3 billion after negotiations with the government in Islamabad.
According to an official, Pakistan and the Chinese company had initialed an agreement for building a Liquefied Natural Gas (LNG) pipeline from Gwadar, but the company has now lowered the contract price to $1.3 billion compared to $1.5 billion quoted in the financial bid given to Inter-State Gas Systems.
Earlier, China had expressed concerns over the slow progress being made in awarding the contract for the LNG pipeline.
A revised PC-1 of the project has been approved by the Central Development Working Party of the Planning Commission. Now, the project has been sent to the Executive Committee of National Economic Council (Ecnec) for formal approval.
According to the official, Pakistan will negotiate a loan agreement with the Export-Import Bank of China that has already made an offer in this regard.
He said the gas utilities were working on extending the pipeline network at a cost of $1.1 billion that amounted to $34 per inch metre, but the cost of building the Gwadar LNG pipeline was $32 per inch metre.
The Chinese company will also construct an LNG terminal at Gwadar Port on the build-and-operate model and it will be able to handle 600 million cubic feet of LNG per day.
The previous Pakistan People’s Party-led government had imposed gas infrastructure development cess (GIDC) on gas consumers for laying these pipelines and so far Rs183 billion has been collected.
However, the current PML-N government has spent the entire collection on metro bus projects and nothing is left for implementing gas import projects.
For the Gwadar LNG pipeline and terminal project, China will provide 85% of financing whereas Pakistan will contribute the remaining 15%. This is an additional burden that gas consumers will be bearing in addition to paying billions of rupees in GIDC.