IP pipeline: Govt considers alternative as Russia caves in to pressure

Published: April 25, 2012

Project to get funds from engineering contractor, infrastructure cess. DESIGN: FAIZAN DAWOOD

KARACHI: The government is working on an alternative plan to finance the $1.5 billion Iran-Pakistan (IP) gas pipeline as hopes for funding from Russia fade in the face of mounting pressure from the US to stop the project, says a senior government official.

Earlier, a Chinese bank backed out of financing the vital gas supply project which may ease most of the energy shortage in the country.

“In the alternative plan, the government is studying a joint investment formula, according to which the engineering, procurement and construction (EPC) contractors will be invited to provide some funds for the pipeline,” the official said.

In talks held between Pakistani and Russian officials in the first week of April in Moscow, Pakistan asked Russia to either extend a loan or provide finished products and other material relating to the pipeline. Russia agreed to respond to the proposal in two weeks, but no response has been received so far.

After the return of the delegation from Moscow, the government officials had, however, announced that Russia had agreed in principle to give financial and technical assistance for the pipeline.

“A reminder has been sent to Russia in this regard and it is to reply by April 30,” the official said. Petroleum Secretary Ijaz Chaudhry also confirmed that Russia had not yet responded to the proposal.

Pakistan approached Russia after a Chinese bank hinted at its inability to push ahead with financing the project amid increasing US pressure. Russia offered to finance the entire pipeline during a four-day visit of Foreign Minister Hina Rabbani Khar to Moscow in February.

Moscow linked the proposal with the award of contract to its energy giant, Gazprom, without bidding. However, to give its consent the government will have to waive Public Procurement Regulatory Authority (PPRA) rules, designed to ensure transparency in government dealings.

“Funds will be generated through infrastructure gas development cess and EPC contractor will also be asked to extend some financing,” the official said, adding the government would make it part of the tender for EPC contract.

A sub-committee of the Economic Coordination Committee (ECC) on IP gas pipeline had decided that the government would go ahead with the project even if Russia and China showed reluctance.

In the project, an 800km-long pipeline will be laid from the Iran-Pakistan border to Nawabshah. The project has entered implementation phase and work on front-end engineering and design, feasibility and detailed route survey is under way.

A joint venture of Germany’s ILF and Pakistan’s Nespak has been tasked with the engineering work and survey, which is scheduled to be completed by June.

Published in The Express Tribune, April 25th, 2012.

Reader Comments (18)

  • Cautious
    Apr 25, 2012 - 9:10AM

    Russia financing the IP was something invented in Pakistan – you never read a word about that on any international news outlet. It’s unfortunate that your news media chooses to publish these stories with little or no independent investigationRecommend

  • Sheda_Rambo
    Apr 25, 2012 - 10:04AM

    The IP pipe line Project is out life line in current economic and strategic situation, Loosing this life line would mean Economic Death by our own hands,
    If Russia or China are excluded from the financing list then we should move to Joint EPCC contract with Companies form S.Korea & Turkey.
    EPCC contracts will ensure continuous flow on cash and timely completion of project.

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  • jamal
    Apr 25, 2012 - 10:35AM

    USD1.5b is not a huge sum for a country of 180 million with 4.2million pakistani living abroad. government can issue bonds to finance the pipeline and later convert it into equity of the company managing the pipeline. institutional investors and individual investors can subscribe to it. for a commercially viable, financing cant be a prob.

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  • Syed Khalil Ullah
    Apr 25, 2012 - 10:48AM

    From where to arrange funds, this is a matter but Pakistan must have to arrange, because we have no other practical alternate for gas except Pak-Iranian gas pipeline.

    Recommend

  • Organ of Big Profit
    Apr 25, 2012 - 11:11AM

    Gas or death, face the facts, we for Gas! We for IP!

    Recommend

  • JS
    Apr 25, 2012 - 11:39AM

    @Sheda_Rambo:
    IP pipeline is not our lifeline out of this economic mess. Only proper governance, professionalism, and checks on corruption are our lifelines…..what most pakistanis fail to understand is that you cannot have islands of success/professionalism/progress in a general environment that is corrupt to the core. Sometimes its “fix the paki aviation industry,” then “fix the energy problem,” then “fix railways,” then “fix foreign policy”…..do you people not see that everything we have done and are doing, we have failed miserably in because the basic environment and prerequisites (rule of law) for success are not there for any policy to succeed.

    Recommend

  • ashok
    Apr 25, 2012 - 1:01PM

    Auction the land of new proposed Army GHQ Building which can easily fetch $3 to $4 BILLIONS.

    Recommend

  • Sheda_Rambo
    Apr 25, 2012 - 2:03PM

    @JS
    Your point regarding the Corruption is Valid, you in your post mentioned ” Fix the energy Problem” but Did not thought for a sec that, even if we have clean n non-corrupt society/Govt
    Availability of resource must be there to manage any thing.
    Off course One can say IP Project is useless project if we are considering to Buy / Import all our needed Energy at 18$/ unit, which is 3 times more costlier than Gas from Iran.

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  • Its (still) Econonmy Stupid
    Apr 25, 2012 - 2:03PM

    Pakistan send a missle 800 km in the air but so called nuclear power country can not build 800 km hollow 3-4feet diameter steel pipe for pipeline on the ground within its own borders. Is something wrong with this picture or do I need a new pair of glassess?

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  • Wajahat Shamsi
    Apr 25, 2012 - 3:27PM

    The government should use the undocumented part of our economy to fund this project. With the estimate size of our black economy being 25% of the GDP, it should not be a problem to generate the funds from within. A listed company should be made with its shares being offered without knowing the source of the income of the shareholder, similar to the one being formulated to inject capital into the stock exchange. This way the company would have enough capital to procure materials for the billion dollar project. The company should be run by professionals who would be answerable to the shareholders.
    Similarly, the government should fund projects where foreign capital is difficult to attain.

    Recommend

  • Serhat Khan Yousafzai
    Apr 25, 2012 - 3:29PM

    The world is not building these pipelines any more, they are infact importing LNG from Qatar and Australia. Why are we fixated on importing Gas from Iran when we can build an LNG impor terminal in 24 months and fix all of our gas problems without irritating the world. Why is this so controversial?

    Recommend

  • curious outsider
    Apr 25, 2012 - 3:34PM

    Looks like China isn’t the best of friends after all… no one believes it – not even after a whole “year of friendship.” And it looks like this year its India’s turn to be best friends with China if you put any credence in “year of friendship” paradigm. And Russia likely was checking with India – not the U.S.

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  • Hope
    Apr 25, 2012 - 3:44PM

    What’s wrong with TAPI ? Is it expensive than IP ?

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  • jamal
    Apr 25, 2012 - 4:40PM

    @Hope:
    definitely, coz it goes accross afghanistan and nobody is sure of situation there specially after 2014. also in principle, why shouldnt we get resources from next door? probably another route can be undersea extension of pipeline from Qatar to UAE to Pakistan. first phase of the pipeline is already operational.

    Recommend

  • Beatle
    Apr 25, 2012 - 6:43PM

    Why not ask Iran to extend support. They can double-benefit in such case. We have
    un-seccessfully tried one of our “”Time-Tested-Fried, nalemy China”"”. Lets try the other.

    Recommend

  • Parvez
    Apr 25, 2012 - 11:29PM

    Trade opening NATO supply route for IP gas pipeline.

    Recommend

  • Apr 26, 2012 - 4:25AM

    Even if Pakistan finds a way to finance IP pipeline, Pakistan’s best interest is not in defying Saudis and Americans to buy expensive Iranian gas and end up with crippling sanctions which could be much worse than its current energy crisis. Its best interests will be served by developing its own cheap domestic shale gas on an accelerated schedule with Saudi investment and US tech know-how. If the Americans and the Saudis refuse to help, then Pakistan will have a stronger case to go with the Iran gas option.

    http://www.riazhaq.com/2012/04/affordable-fuel-shortage-hurts-power.html

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  • Drone
    Apr 27, 2012 - 3:40AM

    America can easily bomb any pipeline built with drones. no?

    Recommend

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