India in advanced talks for gas export to Pakistan

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SME Times News Bureau | 18 Aug, 2014
State-run gas utilities from India and Pakistan are in advanced talks for export of gas via a pipeline running from Jalandhar in India to the Attari border and to Lahore in Pakistan.

Negotiations between the sides on commercial aspects of the gas export are at an advanced stage, a petroleum ministry official said.

While Pakistan has been asking India to re-consider the proposed gas price, India has sought sovereign payment guarantees before entering into any contract.

Petroleum Minister Dharmendra Pradhan informed parliament earlier this month that negotiations are underway between GAIL India and the Inter State Gas Systems (ISGS) of Pakistan for supply of five million metric standard cubic metres a day (MMSCMD) of lean gas to Pakistan for a period of five years.

Under this proposal, GAIL would lay 110 km pipeline from Jalandhar to the Amritsar-Attari border. The technical feasibility of laying the gas line up to Lahore has already been ironed out after five rounds of negotiations between both sides.

Liquefied natural gas, or LNG, will be imported through terminals in Maharashtra or Gujarat and then moved through GAIL's existing pipeline network up to Jalandhar. LNG would be gasified by the Indian side as Pakistan does not have an LNG import facility.

LNG imports into India are currently in the range of $13-14 per million British thermal units (mbtu) and after including customs or import duty, pipeline transportation charges and local taxes, the delivered price will be close to $21 per mbtu.

Finance Minister Arun Jaitley in his budget speech last month did not mention the bit on concession in gas exports to Pakistan, but included it in the relevant documents.

"Exemption from basic customs duty is being granted on re-gasified LNG (liquefied natural gas) for supply to Pakistan," said the relevant section pertaining to the amendments in the Customs Act.

The basic customs duty stood at 5 percent before.

India, on its part, has sought sovereign payment guarantees from Pakistan, including sureties for three months' payment and advance termination commitments, the official said.

The pipeline project is also being seen as a feasibility study for the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline project through which both India and Pakistan propose to import LNG from the central Asian region.