GAIL seeks payment guarantees from Pakistan

With India expressing its willingness to export gas to Pakistan and the state-run GAIL India terming it as a feasible project, Pakistan has asked India to re-consider the high gas price it is asking while India has sought sovereign payment guarantees before entering into any contract.

Officials in the Petroleum Ministry said that while Pakistan is ready for import of gas from India through a 110-km pipeline, it has asked India to re-consider the price of gas. India has expressed its willingness to export 400 million cubic feet of gas per day to Pakistan.

Currently, things are on the backburner in view of the freeze in India-Pakistan relations due to recent incidents on the LoC.

“Negotiations on various commercial aspects of the gas export as well as pricing of gas are being negotiated by both sides. Hopefully, things would be resolved soon,” a senior Petroleum Ministry official remarked.

LNG imports into India are currently in the range of $13-14 per million British thermal units and after including customs or import duty, pipeline transportation charges and local taxes, the delivered price will be close to $21. LNG would be gasified by the Indian side as Pakistan does not have an LNG import facility.

For its part, India has sought sovereign payment guarantees from Pakistan before signing an export contract. The pipeline would start from Jalandhar in Punjab leading through Attari. “We want Pakistan to provide payment guarantees before GAIL India enters into a gas supply contract with any Pakistani entity. We want sureties for three months payment and advance termination commitments,” the official added.

Both India and Pakistan have till date held five rounds of negotiations and it has been found technically feasible to export gas into Lahore.

GAIL India officials said gas in its liquid form (liquefied natural gas, LNG) will be imported through terminals in Maharashtra or Gujarat and then moved through GAIL’s existing pipeline network till Jalandhar.

Pakistan is faced with a serious energy deficiency and is keen on importing gas from India to meet its rising energy needs. This deal has become crucial as there is uncertainty over the completion of the Iran-Pakistan gas pipeline due to U.S. pressure. Islamabad plans to take 1-1.5 million tonnes of LNG. Pakistan, with a total electricity generation capacity of about 20,000 MW, faces a huge power deficit as well.

The pipeline project is also looked upon as a feasibility study for the Turkmenistan-Afghanistan-Pakistan-India pipeline through which both Pakistan and India propose to import natural gas from the Central Asian nation.