Finding a way: Private Iranian firm may lay gas pipeline in Pakistan

Published: January 9, 2013

The move suggests that the postponement of President Zardari’s trip to Iran at the eleventh hour last month, has not stalled progress. CREATIVE COMMONS

ISLAMABAD: 

Iran has designated a ‘clean’ private company, which has not been placed under US sanctions, to take a direct contract for laying a pipeline in Pakistan under the Iran-Pakistan gas supply project for which Tehran is extending a $500 million loan.

The two countries have already signed an initial agreement on the loan, but the accord is yet to be finalised. In the first phase, Iran will lend $250 million and extend the assistance later to $500 million.

The move suggests that the postponement of President Asif Ali Zardari’s trip to Iran at the eleventh hour last month, apparently in response to US pressure, has not stalled progress, albeit slow, on the project.

An Iranian team, which visited Pakistan last week, discussed the award of the pipeline construction contract to its private firm, Tadbir Energy. Gaspor Iranian, which faces no sanctions from any foreign government is controlled by the Imam Khomeini Foundation, one of Iran’s largest charitable groups.

As hurdles stand in the way of making payments to Iranian firms due to US and EU sanctions, the two sides have drawn up a plan to finance the gas pipeline on Pakistan’s side without the need of Islamabad transferring funds to Tehran.

Sources told The Express Tribune that the board of directors of Inter-State Gas Systems Limited (ISGS) in a meeting held on Wednesday was told that Iran had designated a private firm for the pipeline construction contract against the loan of $500 million. ISGS, established in 1996, works on gas import projects.

According to sources, the proposal will be tabled before the Economic Coordination Committee (ECC) of the cabinet for approval. The contract will be given to the private firm on government-to-government basis and a request will be made to waive Public Procurement Regulatory Authority (PPRA) rules in the award of contract without bidding.

“Pakistan will not pay any money to the company, instead the Iranian government will pay $500 million directly to the firm for the construction of the pipeline,” a source elaborated.

Earlier, President Zardari was scheduled to visit Iran on December 7, 2012 to seal the fate of the gas pipeline, critical to meet Pakistan’s pressing energy needs and ease shortages. However, he skipped the trip at the last moment and went to Britain, which different quarters believed was the result of US pressure.

This theory was supported by the US announcement of $200 million assistance for Diamer Bhasha Dam and release of $688 million under the Coalition Support Fund (CSF) after the postponement of the trip.

Despite all this, “recent developments indicate that the two countries are pushing ahead with the project, ignoring US pressure,” a source said.

Last year, Tadbir Energy sought to take over a French refinery, which experts called a legal move as the company faced no sanctions. However, they cautioned that the firm would be subject to tighter controls and might be barred from purchasing equipment.

“Now, the problem of funds transfer to an Iranian firm has been resolved, but the firm may face restrictions in the purchase of equipment for the pipeline,” an official said.

The project envisages gas flow of 750 million cubic feet per day (mmcfd) by the end of December 2014, which will be consumed in power plants to generate around 4,000 megawatts of electricity.

The engineering and project management consultant, who was appointed in April 2011, has completed work on bankable feasibility study, interim front-end engineering design and route reconnaissance survey.

The consultant has also submitted final reports on the detailed route survey and final front-end engineering design, which is under review.

Published in The Express Tribune, January 10th, 2013.

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Reader Comments (8)

  • cautious
    Jan 10, 2013 - 12:08AM

    So Pakistan is going to get a pipeline that is 1/3′rd finished – debt of $500 million owned to Iran – and has to find another Billion to finish the pipeline – find money to actually pay for the gas – and avoid sanctions to boot. That about sum it up? Good luck – you going to need it.

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  • FJ
    Jan 10, 2013 - 3:23AM

    Thanks Iran.

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  • Raj - USA
    Jan 10, 2013 - 3:24AM

    This is what I wrote on Dec. 18, 2012 on the news item titled:
    An offer you cannot refuse: Iran offers crude supply on deferred payment:

    A story I heard during my school days:
    Someone sent his servant to buy a coconut from the market. He tells the servant “Always bargain. Ask him if he can give it for half of whatever price he quotes. He will agree.” The servant goes to the coconut vendor and asks the price. The vendor says it is Rs. 200. Servant asks the vendor if he can give it for Rs. 100. Vendor says, since he is the first customer and does not want to turn him away he would give it for Rs. 100. Servant asks the vendor if he can give it for Rs. 50. Vendor thinks for a while then says that he really need Rs. 50 to buy some medicine immediately. So he would give it for Rs. 50. Servant asks the vendor again if he can give it for Rs. 25. The vendor gets annoyed and tells the servant mockingly, he can even have the coconut for free. Servant asks the vendor if he can give two coconuts for free …………….
    As long as Pakistan holds back, Iran will better the offer.

    My joke is coming true as this news item says:
    “Pakistan will not pay any money to the company, instead the Iranian government will pay $500 million directly to the firm for the construction of the pipeline,” a source elaborated.

    Coconuts are free. Iran is also offering to give away two coconuts free as another news in today’s ET says that Iran is also offering to invest in Karachi’s public transport system.
    http://tribune.com.pk/story/491188/expression-of-interest-iran-to-invest-in-karachis-public-transport-system/

    Now Pakistan should ask Iran to fund Diamer-Bhasha Dam !!!!!!!!!!!!!!!!!!!!!!

    here is the link to my earlier comment.
    http://tribune.com.pk/story/480910/an-offer-you-cannot-refuse-iran-offers-crude-supply-on-deferred-payment/

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  • Liberal
    Jan 10, 2013 - 9:32AM

    Ban this company also

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  • Bilal
    Jan 10, 2013 - 6:05PM

    @Raj-USA, read the first para again. Iran will be paying its company on behalf of Pakistan. Pakistan will have to pay back this loan of 500 Million USD.

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  • Raj - USA
    Jan 10, 2013 - 8:16PM

    @Bilal:
    Yes, I know Pakistan has to pay back. But it did not go well with my joke. So, ignored it intentionally.

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  • saj
    Jan 11, 2013 - 6:31AM

    Thanks Iran

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  • he
    Jan 12, 2013 - 4:57AM

    @Raj-USA: Had you also ignored it if the coutry was India?

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