The deal follows a draft agreement approved by the Russian Government on cooperation with the Pakistan Government to build the pipeline project.
The pipeline, which will be built in phases, is a part of a deal signed in December 2014 between Russian firm Rostec subsidiary RT Global Resources and Pakistani Inter State Gas System (ISGS) for the construction of oil and gas infrastructure in Pakistan.
The deal, in addition to North-South gas pipeline in Pakistan, includes the development of liquefied natural gas terminals, to meet the increasing natural gas demand in the country.
With an annual capacity of 12.4 billion cubic meters, the 1,100km gas pipeline is designed to connect liquefied natural gas (LNG) terminals in the southern Pakistani city of Karachi with Lahore in the northeast.
Work is currently underway on the route, design and engineering operations of the pipeline project, which is planned to be commissioned by 2020.
Russia Energy Minister Aleksandr Novak said: "The construction of the North-South gas pipeline is bringing economic cooperation between Russia and Pakistan to a new level."
RT Global is expected to own and operate the pipeline project for 25 years, following which the responsibility will be transferred to the Pakistan Government.
RT cited Pakistan Petroleum and Natural Resources Minister Shahid Khaqan Abbasi as saying: "Currently there’s an acute shortage of energy in the densely populated regions of Pakistan, specifically in the center and north of the country. It limits economic growth.
"The pipeline construction will be an important step towards solving this problem and will serve as the basis for cooperation with our Russian partners."
Russia plans to inject $2bn on the project, which will also see support from potential Chinese investors, reports Bloomberg.
Image: Officials from Pakistan and Russia signing the deal for the pipeline project. Photo: courtesy of Rostec.
