Pak-Russia $3b PSGP project: Talks on shareholding contract may end up inconclusively

Khalid Mustafa
Thursday, Oct 28, 2021

ISLAMABAD: The Pak-Russia talks on shareholding agreement (SHA) on the flagship $3 billion Pakistan Stream Gas Pipeline (PSGP) are most likely to end inconclusively today (Thursday) as both the legal teams have so far failed to agree on critical elements of the contract.

The shareholding agreement document is too big and it is not possible for the legal teams to finalize it by today (Thursday), a senior official at the Energy Ministry told The News. However, the talks on financial, legal and technical issues will continue through video links and the Russian delegation will again visit Islamabad to finalise the agreement.

However, sources said that the Pakistan side was not well prepared and on the third day of talks, their body language remained negative and no talks could be held from 12 noon to 4 pm. The secretary petroleum joined the talks at 4pm as earlier he was busy because with his other official engagements.

The inconclusive talks on SHA will not only delay the project but also the construction and commissioning of new LNG terminals, one by Energas and other one by Tabeer, which are aligned with the PSGP’s commissioning.

The delay in finalizing the agreement will also defer the initiation of pipeline's construction work.

However, the sources said that legal teams of both sides have been asked to furnish the list of common or agreed points of the Shareholding Agreement draft and the remaining clauses will be deliberated later on. The Russians have clearly asked the Pakistan legal team not to unilaterally remove or add points in draft.

More importantly, Moscow also raised the query as to what will happen if it provides finances for the PSGP against the shareholding of Pakistan but the Government of Pakistan offloads its share to a third party.

Meanwhile, the Petroleum Division issued a very tricky statement here on Wednesday saying that talks on PSGP continue on a positive trajectory claiming the project is on track to meet the timelines, but in the same statement highlighted that any negotiations involving a project of such magnitude including financial, technical and legal details require time, understanding between the parties and arriving on mutually beneficial consensus. This means that talks will remain inconclusive by today (Thursday) after the end of four days’ time.

According to the official statement, the two countries are currently holding the first session of negotiations over the Shareholders Agreement (SHA) of the Pak Stream Gas Pipeline. The Pakistani team was led by Dr. Arshad Mehmood, Secretary Petroleum Division, Syed Zikria Ali Shah, Managing Director of Inter State Gas Systems, and other officials of the Petroleum Division. Moreover officials from the AG office, Law Division, Foreign Office and Finance Division also attended the session. Vladimir Shcherbatykh, General Director of PakStream Ltd, is heading the Russian side with other officials from the Russian delegation comprising financial and technical experts from the Russian government and allied entities.

The 1,100-km gas pipeline is to be laid from Karachi to Kasur (Lahore) with 1.6 bcfd capacity. The Pak Gas Stream Pipeline project is a strategic project, which has made more progress in the last four months than the preceding five years.