India seeks payment guarantee from Pak to sign gas agreement

India has sought from Pakistan sovereign payment guarantees before it can sign a contract to export natural gas through a pipeline from Punjab.

PTI| Updated: Nov 02, 2013, 15:18 PM IST

New Delhi: India has sought from Pakistan sovereign payment guarantees before it can sign a contract to export natural gas through a pipeline from Punjab.

State-owned gas utility GAIL India Ltd plans to initially supply 5 million standard cubic meters per day of gas to Pakistan through a 110-km pipeline from Jalandhar to international border near Atari.

But before GAIL enters into a gas supply contract with a Pakistani firm, New Delhi wants Pakistan to provide payment guarantees, sources privy to the negotiations said.

Five rounds of negotiations have been held between the two sides and it has been found technically feasible to export gas from Punjab into Lahore.

Besides sovereign guarantees, India wants sureties for three months payment and advance termination commitments, they said.

GAIL plans to import gas in its liquid form, called liquefied natural gas (LNG), on a port in Gujarat or Maharashtra.

After converting this again into gaseous state, it is proposed to transport the gas through cross-country pipeline network to Jalandhar.

From Jalandhar, a 110-km line is proposed to be laid to international border near Atari for delivery to Pakistan.

Pakistan wants to import gas from India to meet its rising energy deficit. Initially, it wants to take 1-1.5 million tonnes of LNG (5 mmscmd).

This can run a power plant of up to 1,200 MW.

Pakistan faces huge power deficits and its electricity generation capacity at about 20,000 MW is less than India's generation capacity from renewable energy sources like wind.

Sources said pipeline exports to Pakistan are being looked upon as mode for testing viability of an energy pact with the neighbouring nation as a precursor to India importing gas through Turkmenistan-Afghanistan-Pakistan-India pipeline.

If this system of payments and guarantees works, then imports through the TAPI pipeline could be feasible.

Sources said the delivered price of gas will be up to USD 22.3 per million British thermal unit after including transportation charges and all taxes and duties.

Considering imported LNG price of USD 14.50, the delivered rate would be USD 15.46 after considering shipping and import duty charges. After re-gasification and service tax, it would cost USD 17.01 per mmBtu.

Further, transportation of gas through trunk pipelines would cost a further USD 1.75 exclusive of service tax. Then again, USD 0.5 would be charged for transportation of gas through a dedicated pipeline up to Indo-Pak border bringing the total cost to about USD 19.54 per mmBtu.

A slew of other costs along with Value Added Tax (VAT) is expected to raise the price of gas to a final USD 22.3 per mmBtu at which it can be delivered to Pakistan, they added.