Russia to Lend Pakistan $2 Billion for Gas Pipeline Construction

Pakistan and Russia have finalized an agreement under which Moscow will lend Islamabad $2 billion to lay a pipeline that will transport liquefied natural gas (LNG) from Karachi to Lahore.

In return Russian companies will be given the contract to build the pipeline. The Russian contractors will build a 1,100-kilometer-long pipeline. The first LNG exports will start in 2016, and Russia has also offered to sell gas to Pakistan.

This is not the first major cooperation agreement between the two countries over infrastructure. The former Soviet Union had financed the construction of the state-owned Pakistan Steel Mills under a similar arrangement. It had also helped to supply oil drilling equipment for the state-owned Oil and Gas Development Company. Some of that equipment is still in use today.

Earlier this month, Pakistan launched its first LNG import terminal in the southern seaport of Karachi in a bid to counter power shortages in the country. But the consumption of gas in the country exceeds the existing pipeline capacity; hence, new pipelines are needed urgently.

Natural gas is liquefied for transportation over long distances and must be degasified before being distributed further via pipelines.