CNPC to finance Pakistani LNG project in full

19 May 2016, Week 19 Issue 593

China National Petroleum Corp. (CNPC) is to finance the entire Gwadar LNG terminal and pipeline project in Pakistan after the Islamabad government failed to deliver its agreed financial share, a report has said.

Under a joint venture proposal, China was originally supposed to provide 85% of the US$2 billion cost and the balance would come from the Pakistani government. But Islamabad has stalled on providing any funding.

Pakistan media said a final agreement to proceed with the project was signed last week between CNPC and Islamabad, with December 2017 a target date for completion.

“After having weighed Pakistan’s inability to pay for the infrastructure project, the Chinese asked the government to apply for a loan,” Pakistan’s Express Tribune said. “But the government continued to drag. Left with no alternative and irked by government’s inability to even apply for a loan, the Chinese have agreed to finance 100% of the project.”

Funds supposedly raised by the Pakistani government via a special tax have been spent on other developments, it said.

CNPC’s subsidiary China Petroleum Pipeline Bureau (CPP) has been awarded the contract for the whole project, which includes a more than 700-km pipeline running from the west coast to Nawabshah in the eastern region of Pakistan, according to local media reports.

But it remains unclear how big the pipeline will be. A large diameter pipe would raise the overall project cost to about US$2 billion, but Karachi’s The News said the Pakistani government had called for a smaller bore which might reduce costs.

The Gwadar LNG terminal, which will reportedly be capable of handling 500 million cubic feet (14.16 million cubic metres) per day, was planned as an alternative to an Iran-Pakistan (IP) overland gas pipeline. This was abandoned because of international sanctions against Iran, which have now been lifted.

Pakistani media last week suggested that a spur pipeline might eventually be built from the Iranian border to link with the planned Gwadar-Nawabshah line.

Edited by

Andrew Kemp

Editor

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