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Pakistan, India to hold talks on gas tariff today

Pakistan and India will start crucial talks on gas tariff on Thursday.

Both sides will hold parleys on the gas tariff to be delivered in the system of Sui Northern near Lahore. In addition, both sides will also decide about laying down of the infrastructure of the pipeline between the two countries.

The four-member expert team of the state-run gas utility, GAIL (India) Ltd, has arrived to initiate talks with the Pakistani authorities headed by the managing director of the Inter State Gas System. The Indian team is expected to stay for two days.

Pakistan will be provided LNG from GAIL. The factors to determine the gas price will include the LNG price, terminal services cost, re-gasification and transportation costs. India plans to expand its pipeline network for the shipment of LNG across the border. As a result, it has already laid a pipeline network covering 100 km for transporting LNG to Bhatinda, from where the pipeline could have access to Pakistan’s Wagah border to inject gas into the network of the Sui Northern Gas Pipeline Limited.

According to Asim Hussain, advisor to the prime minister on petroleum and natural resources, the volume of gas from India can be enhanced to 500 mmcfd if the agreement is signed.

Pakistan’s gas production capacity stands at 4.2 billion cubic feet gas per day and the country is facing a two bcfd gas shortage. It’s worth mentioning that GAIL has recently signed an agreement with France’s GDF Suez (GSZ.FR) to buy 12 cargoes of LNG worth 800,000 tons in 2013 and 2014.

This agreement is part of various efforts, including creating re-gasification infrastructure and expanding gas transmission capacity, to meet India’s demand for natural gas, as it faces power and natural gas shortages. The domestic natural gas output declined for the 20th consecutive month in July, falling by 13.6 percent from the same month a year earlier to 3.58 billion cubic metres, led by a drop in output at the Reliance Industries Ltd’s (500325.BY) D6 block.

GAIL has been securing LNG to help power the nation’s expanding economy. In December, it signed a contract to buy around 3.5 million metric tons of LNG annually for 20 years from Cheniere Energy’s (LNG) Sabine Pass facility in Louisiana.

In addition, it has also formed a unit in Singapore to trade LNG and petrochemicals. Furthermore, the New Delhi-based company is also working to expand its network of natural gas pipelines from 9,500 kilometres to 14,500 kilometers over the next three years.

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