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Russia in supply agreement with Pakistan

Russian Prime Minister Dmitry Medvedev has instructed the country’s Energy Ministry to negotiate and sign an intergovernmental liquefied natural gas supply agreement with Pakistan in an apparent effort to bankroll a Russia-led gas pipeline project in the country, writes Vladimir Afanasiev.

According to Medvedev’s resolution, the agreement has to be for an initial period of three years, with automatic extensions for subsequent three-year periods if neither government objects to it.

The resolution says that state-controlled Russian gas monopoly Gazprom and Pakistan LNG will co-ordinate LNG deliveries. However, Deputy Prime Minister Arkady Dvorkovich told reporters at the end of last week that state-controlled oil producer Rosneft and the country’s largest independent gas producer, Novatek, have also “expressed interest in becoming LNG suppliers” to Pakistan.

Dvorkovich refused to provide any more details of Russian interest in supplying LNG to Pakistan, saying that conditions are subject to “commercial negotiations”.

According to industry analysts in Moscow, the resolution may be part of an effort by the government to kick-start a long-discussed Russian project to build a gas pipeline in Pakistan. In October 2015, Pakistan agreed to a Russian proposal to appoint a subsidiary of state-owned Russian player Rostekh as a lead contractor to build and then operate the 1100-kilometre gas pipeline in Pakistan.

The pipeline is to link an LNG import terminal in Karachi with Lahore in the north-east of the country, with throughput capacity set at 12.4 billion cubic metres per annum of gas.

A Rostekh executive acknowledged earlier this year that the start of construction is likely to be pushed back by at least one year to 2019, as the sides were unable to agree upon transport tariffs.