India and Pakistan are fast moving towards inking the first ever bilateral agreement to supply liquefied natural gas (LNG) via a 120-kilometre pipeline from Jalandhar to Jallo near Lahore via Wagah border for a limited period of five years.
The project to supply gas to Pakistan will be executed in 18 months during which Gas Authority India Limited (GAIL) will lay a 110-km pipeline from Jalandhar to Wagah via Amritsar and Pakistani Inter State Gas Services Company will lay a 10-km pipeline from Wagah to Jallo, on the outskirts of Lahore.
External affairs ministry sources said the agreement will be finalised between the two companies after negotiations on gas price and security of payments are concluded.
While India wants to supply gas at a price linked with crude prices plus a fixed component that includes transportation tariff, state tax, VAT and services tax, Pakistan wants the tax component to be deducted as gas supply is a deemed export. The petroleum ministry has now approached the finance ministry to seek tax exemption for gas supply to Pakistan. The gas supply is expected to start two years from the day the agreement is inked.
GAIL wants an international bank or sovereign guarantee from Pakistan to ensure security of its payments with a three-month advance and easy closure of contract incorporated in the terms of agreement.
“Given the delicate relationship between the two countries, GAIL wants the immediate closure built into the gas supply contract. We expect the contract to go through as Punjab chief minister Shahbaz Sharif is pushing for gas supply with his brother Pakistan Prime Minister Nawaz Sharif,” a senior official said.
According to negotiations between the countries, India will supply 5 million cubic metres of gas daily to Pakistan at a pressure of 50 kg per square centimetre in Wagah.
The gas will be technically “lean”, containing only methane and devoid of higher hydrocarbons like propylene and ethylene. The delivered gas would actually be imported Qatari LNG processed by Petronet-LNG terminal at Dahej. It will then be compressed all the way up to Nangal near Jalandhar.