India, Pakistan LNG Supply Deal Almost Done

India and Pakistan are close to signing the first ever bilateral agreement to supply LNG via a 120-kilometre pipeline from Jalandhar to Jallo near Lahore via Wagah border, Hindustan Times reported.

The paper said that the period of agreement is expected to be five years where India will supply 5 million cubic metres of gas daily to Pakistan.

The pipeline project is expected to take about 18 months during which 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, Hindustan Times said.

External affairs ministry sources told the newspaper that 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, Hindustan Times said.

“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 told the newspaper.