New China pipeline to replace IP pipeline project?

According to reports, Pakistan and China are set to sign a US$3 billion deal during the upcoming visit of Chinese President Xi Jinping next month to build a natural gas pipeline that would serve as an alternative to the stalled Iran-Pakistan (IP) gas pipeline project.

The new project, though billed as an alternative to the Iran-Pakistan pipeline, would in reality serve as a complement to that project.

The Chinese project would construct a liquefied natural gas (LNG) import terminal from Gwadar to the main natural gas distribution hub in Nawabshah (both in Pakistan). The pipeline location and dimensions, however, would mean that the Gwadar-Nawabshah component could be connected to any eventual Iran-Pakistan pipeline that would be built if and when sanctions against Tehran are removed. LNG imports are typically somewhat more expensive than pipeline imports.

According to initial estimates, the cost of the project is expected to be US$3 billion, of which US$1 billion will be needed to lay the pipeline from Gwadar and over US$2 billion will be required to construct the terminal with LNG handling and re-gasification facilities, in addition to developing large storage facilities.

Under the protocol, China will meet 85% of the financing needs for constructing the LNG pipeline linking the Gwadar Port to Nawabshah and the terminal.

Pakistan’s Economic Coordination Committee (ECC) of the Cabinet has already given in-principle consent.

The LNG pipeline starting from Gwadar will be extended to Iran for gas import when sanctions on Tehran are lifted. The pipeline will have the same specifications that were proposed for the IP pipeline including a diameter of 42 in.

Edited from source by Elizabeth Corner

Published on 27/02/2015

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