Iran-Pakistan gas pipeline: China likely to be awarded construction contract

Beijing may also provide financing in line with growing energy cooperation.

ISLAMABAD:

As Russia and China vie with each other to win the construction contract for the Iran-Pakistan gas pipeline project, Pakistan is expected to finalise an engineering and procurement deal with Beijing, which may also provide financing in line with the growing energy cooperation between the two sides.

Domestic gas utilities – Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipelines Limited (SNGPL) – are also lobbying to grab the engineering, procurement and construction contract for the pipeline, which will bring in much-needed gas from Iran’s South Pars gas field.

Germany-based consultancy firm ILF is conducting a route survey for the $1.25 billion Pakistani portion of the pipeline and will soon be completing its work, after which the engineering contract will be awarded. SSGC and SNGPL had also wanted a share in the consultancy contract with ILF, which resulted in a delay in completing the survey, sources said.

ILF, which got the contract for $55 million, is working in collaboration with National Engineering Services of Pakistan (Nespak).

“A major part of the survey for laying the pipeline from Iranian border to Nawabshah has been completed and the remaining part will be finished by August 2,” an official said.

During Musharraf’s rule, the government had floated a proposal, asking China to import Indian share of the gas pipeline after Delhi pulled out of the project. However, the proposal did not go through.

Sources told The Express Tribune that a Pakistani delegation, led by Federal Water and Power Minister Naveed Qamar, would seek investment and offer the engineering and equipment procurement contract for the gas pipeline to China. The delegation will raise the issue in a meeting of the Pak-China joint energy working group scheduled to be held on August 1-2 in Beijing.

Sources said security agencies had given clearance to the route of the pipeline. “The Bugti area is a sensitive location for oil and gas exploration activities, but other areas are safe for the transport of Iranian gas through the pipeline,” a source said.

Earlier, Pakistan had also made a formal offer to Russian energy giant Gazprom, the largest extractor of natural gas in the world, to participate in the Iran-Pakistan pipeline project in a meeting of the Pak-Russia Inter-governmental Commission held on September 22, 2010 in Russia.

Pakistan and Iran have already signed an agreement on sovereign guarantee for the project. They have also inked a gas sale and purchase agreement for import of 750 million cubic feet per day (mmcfd) of natural gas with a provision to increase the volume to one billion cubic feet per day.

The project will be funded through public-private partnership, which will cost Pakistan an estimated $1.25 billion for its side of the pipeline.

Under the agreement, gas supply will start in 2014 and Pakistan will have to pay a penalty equal to the cost of 750 mmcfd if it fails to receive gas by the stipulated time.





Published in The Express Tribune, July 31^st, 2011.