Rs175b financing approved for third LNG

ISLAMABAD: The federal government on Friday approved a Rs175 billion financing plan for the construction of a third liquefied natural gas (LNG-III) pipeline that largely relies on meeting financing needs through commercial borrowings despite the availability of funds.

The Economic Coordination Committee (ECC) of the cabinet approved the total financing plan of Rs175 billion for the LNG-III pipeline that will feed Punjab, which has been the most affected province of declining gas reserves.

Govt to provide guarantees for LNG pipeline financing

The ECC also decided to fully revive the stalled under-construction 1,320 megawatts Jamshoro Power Plant. The project was facing delays due to back-paddling by former finance minister Ishaq Dar and red tapism.

Prime Minister Shahid Khaqan Abbasi convened the ECC meeting in haste without giving proper time for meeting the procedural requirements for calling a meeting and circulating the agenda and summaries among the stakeholders.

The ECC approved the financing plan for 1.2 billion cubic feet per day (BCFD) capacity RLNG-III pipeline project to be undertaken by SSGCL and SNGPL, according to a handout of the Prime Minister’s Office.

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The ECC also directed the Petroleum Division to examine the possibility of the public-private partnership for the project, it added.

The pipeline will be constructed in two years. Out of Rs175 billion, an amount of Rs110 billion will be arranged in the first year.

According to the approved plan, the finance ministry will provide only Rs40 billion out of the gas infrastructure development cess (GIDC) fund, although more than Rs270 billion are available in the fund.

The government had imposed the GIDC to construct gas infrastructure but the money is being largely used to finance the budget.

ECC puts off decision on Rs175b borrowing for RLNG pipeline

The PML-N government has been promoting the LNG as an alternate fuel to meet the electricity and gas shortfalls in the country. It has begun construction of four LNG-fired power plants besides shifting the fertilizer, power and CNG sectors to the LNG. At present there are two LNG terminals operating in the country.

The private sector is also expected to install two more LNG terminals, which will feed the third LNG pipeline, according to officials of the Petroleum Division.

The federal government will provide sovereign guarantees in favour of SNGPL and SSGCL for arranging Rs53 billion commercial loans.

The two gas utility companies will arrange Rs43 billion from their own resources. In case the companies remain unable to arrange funds, the federal government will also provide Rs43 billion worth of sovereign guarantees to meet the financing needs.

The Economic Affairs Division will arrange Rs39 billion from the external lenders for fulfilling the remaining financing requirements.

Jamshoro Power Plant

The ECC also approved to revive the stalled under-construction 1,320 MW Jamshoro power plant on the basis of the third party validation of the demand-supply gap.

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It granted approval for issuance of GoP Sovereign Guarantee for Rs39 billion for construction of two 660 MW coal power projects at Jamshoro, according to an official handout.

It added the approval has been granted after third party evaluation of the project and authentication of the projected demand and supply data submitted by NTDC.

The total cost of the project is $1.5 billion. The Asian Development Bank has given $900 million loan for the project in 2014. Pakistan had also secured $220 million from the Islamic Development Bank.

But the project got stuck up after the former finance minister raised the question of bringing 1,320MW electricity into the national grid (first) few months ago, according to official sources.

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The decision to revive the project was taken only after the Economic Affairs Division and finance secretaries highlighted the adverse impacts of not fulfilling the commitments given to the ADB and the IDB, the officials said.

Since November 2014, the country has been paying 0.15% of the total amount in commitment charges on undisbursed amount.

Tax waivers

The ECC also withdrew 5% sales tax and 4% customs duty on imported cotton with effective from 8th January, 2018, according to the PM’s Office.

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