Iranian president to visit Islamabad to push for IP gas pipeline project

Published: March 1, 2016
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PHOTO: AFP

PHOTO: AFP

ISLAMABAD: 

Following the lifting of sanctions, Iran President Hassan Rouhani is set to visit Pakistan by the end of this month to push for the Iran-Pakistan (IP) gas pipeline project.

The project was to be commissioned in December 2014, but work was stalled after sanctions were placed on Tehran.

Officials now say that there are hopes that the project could be implemented.

Iran-Pakistan gas pipeline under shadow of politics

The Iranian president will take up the issue during his visit to Islamabad, said an official, adding that Pakistan had committed to completing the project after sanctions are lifted.

Any delay on part of Pakistan in the post-sanction scenario would result in millions of dollars being imposed as penalty, besides upsetting diplomatic relations between the two countries.

The commitment

Iran had wanted some form of commitment from Pakistan, which was given in the form of awarding the LNG pipeline contract.

Officials say the standalone project of LNG Gwadar pipeline was feasible as the country required the pipeline capacity to pump LNG. A terminal at Gwadar would also help to import LNG.

But the petroleum ministry was facing problems in implementing the project as the Ministry of Finance appears to have spent the entire cess collection from gas consumers in bridging the budget deficit and is reluctant to provide $300 million for executing the $2 billion Gwadar LNG pipeline project, an official said.

This comes despite the Ministry of Petroleum and Natural Resources having approached the finance ministry to seek the release of gas infrastructure development cess (GIDC) collection for spending on planned gas import projects.

The finance ministry instead suggested to borrow around Rs100 billion from commercial banks. Earlier, gas utilities were working on enhancing the capacity of their pipeline networks to create room for LNG transportation.

So far, Rs183.86 billion has been received from consumers in shape of GIDC, which was imposed in January 2012 to finance gas import projects. However, nothing has been left as the finance ministry has consumed the entire amount.

For the Gwadar LNG pipeline, the government is negotiating a commercial deal with a Chinese company for kicking off work by the end of March.

The company, China Petroleum Pipeline Bureau selected by the Chinese government, will provide 85% of financing whereas Pakistan will inject 15% equity into the project.

The company is already working on pipeline projects stretching over 8,000 km in different countries including Myanmar, Bangladesh, Russia and other nations. It has also laid pipelines from Turkmenistan to China.

However, the petroleum ministry is encountering trouble due to delay in release of $300 million as the project should be completed by the end of 2017.

“Owing to delay in financial assistance, we may not be able to finish work on the project by the stipulated time,” an official remarked. The finance ministry, according to the official, was of the view that the government was required to frame cess rules and before that it could not release the funds.

Now, the petroleum ministry has planned to send a summary to the Economic Coordination Committee (ECC) for the availability of necessary funds to finance the pipeline project.

The Gwadar LNG pipeline is an alternative to the Iran-Pakistan gas pipeline project, which was stalled due to US sanctions on Tehran. The curbs have now been lifted and hopes arise that the project will be executed in the next two years.

No all-clear from US for IP gas pipeline project

Under the plan, the LNG pipeline will be laid from Gwadar to Nawabshah and a terminal will also be built at Gwadar port. The pipeline will be connected to the Iranian border at a cost of $200 million.

Published in The Express Tribune, March 1st, 2016.

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Reader Comments (19)

  • Brainy Bhaijan
    Mar 1, 2016 - 9:05AM

    Start the trade, produce the jobs that is so much needed in this economy.Recommend

  • Old Ravian
    Mar 1, 2016 - 10:39AM

    Pakistan’s has a share of dismal 1 % trade with its neighbours. Trade with ALL neighbours need to improve.Recommend

  • Mar 1, 2016 - 11:29AM

    This is a great move and must be taken seriously and with a lot of WARMTH. Iran and China are our immediate and friendliest neighbors and should be handled with care. Great care! SalamsRecommend

  • Mar 1, 2016 - 1:30PM

    all political Parties should Stand with NS to support this project.Recommend

  • Raju
    Mar 1, 2016 - 2:22PM

    This project is not bankable till India joins.Recommend

  • Xnain
    Mar 1, 2016 - 3:04PM

    @NKAli:
    Iran is a friend of her own interest. If they can offer us business, sure why not. But don’t get carried away by the warmth because Ayatollah company has always turned this warmth into wrath at the end of the day. Trade should increase but nothing more than that. Recommend

  • Xnain
    Mar 1, 2016 - 3:09PM

    Any delay on part of Pakistan in the post-sanction scenario would result in millions of dollars being imposed as penalty, besides upsetting diplomatic relations between the two countries.

    Looks more like a threat than a business gesture. And yes, Pakistan should also re-negotiate the price of gas like she did with Qataries. Recommend

  • Guldar Ali Khan Wazir
    Mar 1, 2016 - 4:49PM

    The project should be implement without any further delay. Development and prosperity come in a country when it opens trade and strengthen diplomatic ties with its neighbouring countries. Pakistan and Iran are two Islamic states having shared cultural values. They need to initiate free trade to be greatly benefited by the people of the two states. Recommend

  • Siddique
    Mar 1, 2016 - 6:55PM

    @Xnain:

    Not to sound pro Iran but according to an mutual agreement Iran has built her part of the pipeline and now if Pakistan isnt going ahead with her part owing to some foreign pressure, it is purely logical that Iran asks for some penalty.

    Secondly why do we forget that above all this pipeline is in the benefit of our country. This is far more economical source of energy than the gas we would get from Qatar or through TAPI. Lets take this as our dire need and go ahead with ti.Recommend

  • someone
    Mar 1, 2016 - 8:59PM

    So far, Rs183.86 billion has been received from consumers in shape of GIDC, which was imposed in January 2012 to finance gas import projects. However, nothing has been left as the finance ministry has consumed the entire amount.

    thats all folks keep electing noooras!Recommend

  • curious2
    Mar 1, 2016 - 9:35PM

    IMF says your out of debt capacity so if the Chinese demand sovereign guarantee in addition to “no bid” arrangement for pipeline loan you may have more problems. Sanctions or no IP pipeline is going to be tough to finance/build/protect. Recommend

  • lolz
    Mar 1, 2016 - 9:49PM

    @Xnain: I can understand your misunderstanding. But history of Pakistan will always remember Iran as the very first country that recognized our independence and sovereignty. The harsh phase of sanctions has taught them the business of the modern world, which is good because what could we offer to them all that time? Moreover, China doesn’t have an emotional bond, they also serve their own interests here – which is justified! Recommend

  • buba
    Mar 2, 2016 - 12:57AM

    IP agreement was done in backroom by Zardari govt on it’s last leg – what are the chances that the terms of that agreement make any economic sense? Good deal or bad your likely stuck with a legally binding agreement. Akin to Deko Riq and the Turkish Energy Platform – abandoning contractual obligations can come back to haunt you.Recommend

  • NHA
    Mar 2, 2016 - 1:11AM

    Iran is caught between the devil and the deep sea. Its Indian friends are neither letting it go and do the pipeline with Pakistan nor wanting to be part of it . Iran is being blackmailed consistently yet it is unwilling to improve its poistion vis a vis Pakistan.

    The threat of giving Chabahar port to India and use of Shia card are not the only areas where Iran has to improve its position and take a long-term decision to put the relationship with Pakistan on an even keel. Recommend

  • Pak
    Mar 2, 2016 - 4:13AM

    Pakistan should prefer importing oil & gass from Iran due to lower transportation cost and better price. Pakistan should develope our border area with Iran and Afghanistan also.

    Pakistan has most of its capacity on the Indian border, that is a bad thing in war situation. Pakistan should spread all sourts of capacities to areas far away from Indian border and also this side.Recommend

  • S.R.H. Hashmi
    Mar 2, 2016 - 6:28AM

    Considering the massive shortage of gas in Pakistan, after lifting of sanction on Iran, our officials should have rushed to Iran to finalize the Iran Pakistan pipeline project. This is one project which could benefit Pakistan immensely, and soon, because the Iranian government has already built the pipeline up to its border.

    However, the snag is that the project was signed by Zardari government. And as for Mian Nawaz Sharif, despite his bold words on occasions, he does not seem to be the one who would feel comfortable displeasing the Saudis as well as the Americans who are opposed to this project.

    An additional snag may perhaps be that the IP project may not offer Nawaz Sharif hefty commissions like what Qatar could be offering,

    And not having the courage to do straight talking, much like the population census, Nawaz Sharif’s government will find excuses to delay the project until such time that the Iranians also lose interest in it.

    Such a move could however force Pakistani government to pay hefty fines and penalties, but that would be none of the government’s concerns.

    During his previous tenure, and even during early part of his present term, Nawaz Sharif used to be a bit apprehensive of the armed forces. However, with even that fear laid to rest deep under the soil, Nawaz Sharif seems to be taking just about everything, and everyone in hi stride.

    What a shame.

    KarachiRecommend

  • Xnain
    Mar 2, 2016 - 9:52AM

    @Siddique:
    Of course they were, because they were beneficiaries. If they are able to sell the gas at a price which was fixed when Oil was trading at 100$/Barrel, why wouldn’t they rush to get the project completed?Recommend

  • Xnain
    Mar 2, 2016 - 9:55AM

    @lolz:
    Bhai shaib, If Iran could find buyers for her gas at the price of IP right now, she would have rushed to them to sell putting Pakistan on back burner. Under current circumstances, Pakistan has every right to renegotiate the price of IP gas with Iran. Recommend

  • NHA
    Mar 2, 2016 - 11:11AM

    @Pak: Correct. Hopefully CPEC will help address this situation. Recommend

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