Pakistan and Russia on Tuesday agreed to extend the validity of the North-South gas pipeline deal.
The $2-billion deal was signed in October 2015 and was set to expire today (October 16, 2018).
The two countries extended its validity during Pakistan delegation’s current visit to Russia. A commercial deal for the project has also been finalised during the visit.
Under the agreement, Pakistan’s Inter State Gas System (ISGS) will collaborate with Russia’s state-owned RT Global Resources.
The agreement requires Pakistan to allow RT Global to lay the pipeline without inviting any bidder. Russia in return will lend Pakistan $2-billion.
Under this agreement, RT Global would fund 85 per cent of the project’s cost while Islamabad will contribute 15 per cent of equity.
The pipeline is to be laid under Build; Operate and Transfer (BOT) model which means Pakistan will only gain its control after 25 years.
Initially, Russia demanded $1.2 per MMBTU for gas transmission. However, a negotiation party, set up with the approval of Economic Coordination Committee (ECC), successfully brought down the price to $078 per unit.
Pakistan’s worsening ties with the United States has brought it closer to Russia. The two countries are exchanging friendlies and signing defence and trade agreements which must be an eye-souring sight for the US.
For the first time in history, the two Asian countries inked a defence cooperation deal in August 2018 under which services members of Pakistan would get training in Russian institutions. In September, Pakistan military participated in history’s biggest war games in Russia.
In the same month, Moscow and Islamabad also signed a separate $10-billion offshore gas pipeline agreement under which Pakistan will import around 500 million to one billion cubic foot of gas on daily basis.