Iran upset about slow progress on gas pipeline

Published: June 10, 2013

The project envisages supply of 750 million cubic feet per day of gas to Pakistan beginning at the end of December 2014. PHOTO: FILE

ISLAMABAD: 

Tehran has expressed concern over delay in start of work on the Iran-Pakistan gas pipeline and has pressed Islamabad to swiftly nominate entities for going ahead with the project.

According to sources, Iranian Deputy Minister of Petroleum in International and Commercial Affairs A Khaledi, in a letter on May 27, reminded Pakistan government that after a government-to-government cooperation agreement between the two countries, they were supposed to select entities to commence work on the gas pipeline immediately.

“Iran has already done this, but it is still waiting for any action from Pakistan side. Since time is too short, your prompt instruction in this regard is highly appreciated,” the Iranian minister said.

Sources say a Pakistan team was also scheduled to visit Iran on June 3 to finalise the award of contract to Iranian firm Tadbir Energy that will lay Pakistan’s part of the pipeline, but it put off the trip because of transition of power to a new government after general elections.

Tadbir will act as the lead contractor along with nominated local sub-contractor(s).

Following the agreement between the two sides in the second week of March, Pakistan has failed to pick a sub-contractor for laying the pipeline, which will bring Iranian gas. This has hampered the process of finalising the engineering, procurement and construction (EPC) contract between Interstate Gas Systems and Tadbir Energy and a contract between the EPC contractor and sub-contractor.

Sources say the delay is a matter of worry for Iran that has made no secret of its concerns in previous meetings and drawn immediate attention of Pakistan authorities.

The cabinet has already waived Public Procurement Regulatory Authority (PPRA) rules for the award of contract directly to Tadbir Energy.

Pakistan accepted Iran’s offer to finance and construct the gas pipeline after Russia and China backed out of the project in the face of US pressure.

Iran designated Tadbir Energy to start off work on the project and was also extending a $500 million loan.

Tadbir faces no international sanctions and is controlled by the Imam Khomeini Relief Foundation, one of Iran’s largest charitable groups. It will undertake all engineering, procurement and construction activities in the first phase of the pipeline, which will start from the border and cost around $250 million.

In the second phase, Iran will increase financing by $250 million, but it will hinge on discussions about Tadbir’s involvement in distribution of gas in Pakistan.

Total cost of the pipeline is expected to reach around $1.35 billion. Iran will cough up $500 million whereas the remaining is planned to be generated through the gas infrastructure development cess. The new government will take a decision on the cess, the collection of which has been suspended by the court.

With the US slapping Tehran with a raft of sanctions that have hurt Iranian companies’ ability to do business and created hurdles in making payments to them, Pakistan and Iran drew up a plan to finance the pipeline without the former transferring any funds to the latter.

“Pakistan will not pay Tadbir, instead, the Iranian government will give $500 million to the firm for the construction of the pipeline,” a source said.

The project envisages supply of 750 million cubic feet per day of gas to Pakistan beginning at the end of December 2014 and the fuel will be consumed by power plants to generate around 4,000 megawatts of electricity.

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

Published in The Express Tribune, June 11th, 2013.

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Reader Comments (36)

  • Falcon
    Jun 11, 2013 - 12:01AM

    This is really a shame that we are backing out of a commitment we made to our neighbor, specially when even our ‘all weather friends’ didn’t come to our help at the hour of need.

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  • Faheem
    Jun 11, 2013 - 12:11AM

    If there was hope on this project, it was the previous government (PPPP). It wont happen now, not at least in PML-N government which is a pro-Saudi government.

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  • Billoo Bhaya
    Jun 11, 2013 - 12:14AM

    Another really upset neighbour. Its Pakistan’s way of saying thank you for not meeting its contractual obligations. .

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  • gp65
    Jun 11, 2013 - 12:22AM

    @Falcon: At the time that the MoU was signed by the President in Iran, the contract with Tadbir energy was also signed but it was not. It has appeared to me for the longest time that Pakistan never intended to go ahead with this pipeline but just used it as a negotiating tool with US to get the nuclear deal similar to India – by claiming that they would have to go with the IP pipeline if they did not get the nuclear deal to support nuclear energy in Pakistan. Now that the gambit has not succeeded, there is no intention to move forward.

    After all, the shortage of power generation is due to inability to pay for fuel, not the shortage of fuel in the world. So if there is no money to pay for oil, how will Pakistan pay for the gas (which is not available at the throw away prices that Sui gas is made available. I would not be surprised if this project is closed due to being judged unviable.

    You are correct of course that during the whole process Iran was deliberately misled about the intention of moving forward on this project. Sadly it would not be the first time that Pakistan has failed to follow through on international commitments.

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  • Iftikhar Khan
    Jun 11, 2013 - 12:32AM

    We have to decide that pipeline is for our benefit and then don’t worry about pressure from US or saudi Arabia and go ahead with the project with confidence.

    Today it is gas tomorrow it will be food for which we will need permission from US whether to eat or not! enough is enough.

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  • abdussamad
    Jun 11, 2013 - 12:37AM

    The Iranians know full well this pipeline will never be built. Pakistan is a US client state and can’t afford to displease its masters.

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  • Raj - USA
    Jun 11, 2013 - 12:58AM

    Faisal Raza Abdi said in a recent TV discussion that according to the contract signed with Iran, Pakistan is obligated to pay damages to Iran and also the purchase price for the gas that it had contracted (even if Pakistan does not buy the gas) and that this clause comes into effect from Dec. 14, 2013. I hope Pakistan has some escape clauses in the contract.

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  • Naseer
    Jun 11, 2013 - 1:15AM

    Why do you think Saudi Arabia spent so much money to bring Nawaz Sharif to power? It’s just a matter of time before Pakistan will cancel the gas pipeline project. Our leader are not loyal to the country but very loyal to their financial supporters.

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  • Ali (Texas)
    Jun 11, 2013 - 1:18AM

    sounds like Iran have to re-negotiate the “Cut” for the new government for the work to start !
    nothing happens in Pakistan without the money…

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  • Burraak
    Jun 11, 2013 - 1:20AM

    We demand government to roll back this project ASAP

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  • Realist
    Jun 11, 2013 - 1:36AM

    This shows our inability and immaturity to make firm decisions on the political front – we are in desperate need of gas, which Iran can easily provide us but we are so scared of uncle Sam that we are unable to decide!!! God give these people strength to make bold decisions.

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  • gp65
    Jun 11, 2013 - 1:38AM

    @gp65: Sorry. Typo in my earlier statement.
    I said “the contract with Tadbir energy was also signed but it was not”
    I meant”the contract with Tadbir energy could also have been signed but it was not”

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  • Mazher Mehboob
    Jun 11, 2013 - 1:54AM

    As Nawaz Sharif is more friends with KSA. I hope he turns the history around and make Pakistan a middle ground instead of a battle ground. Recommend

  • naraazsharif
    Jun 11, 2013 - 1:58AM

    Saudi influence in this for sure, you know that guy we elected?…

    If this project is being sabotaged at their behest, it really isnt worth it

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  • John the Baptist
    Jun 11, 2013 - 2:11AM

    @gp65:

    by claiming that they would have to go with the IP pipeline if they did not get the nuclear deal to support nuclear energy in Pakistan. Now that the gambit has not succeeded, there is no intention to move forward.

    Really? So what did india do when it was called the “IPI” pipeline? Sadly, it is not the first time that india has shown the true crookery that defines its policies against its neighbours.

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  • Ali Khan
    Jun 11, 2013 - 3:09AM

    Pleas be pro PAKIATANI say no to pro soudi or pro irani we need energy we need gas we are pro PAKISTAN think of pakistan and only pakistan PAkistan zinda bad pakistan painda bad.????????????????????????????????????

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  • truthbetold
    Jun 11, 2013 - 3:53AM

    It looks like the project is going nowhere. Pakistan has been using Iran in its attempt to “blackmail” the US into giving free dollars and nuke plants. Apparently, the US has called Pakistani Establishment’s bluff. Pakistan just can’t afford to antagonize the US considering Pak’s needs to borrow billions of dollars from the IMF and other international institutions, all controlled by the US. Iran is now going to be real upset on being stood-up

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  • what a mess
    Jun 11, 2013 - 3:53AM

    Sounds like a a soft proxy war being fought through Pakistan’s energy needs. Now you know how the Afghans feel.

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  • asma
    Jun 11, 2013 - 3:58AM

    Give and take between US & NS-USA always takes it’s revenge! The all so important project was left out in the address to Parliament by Nawaz Sharif!!

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  • Jibran
    Jun 11, 2013 - 4:26AM

    From 5pm till 9pm there was no electricity and then from 10 pm till now 4:22 am there is no light. The generator is going to explode. I am not sitting in village but in posh locality of Peshawar where everyone pays bills and taxes but still the government can not provide us electricity. They should go with the Pipe line plan, not tomorrow not the other day. Just do it now, we want electricity at any cast. plz complete the project let Iranians do it for us if you are impotent. Mercy.

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  • Rex Minor
    Jun 11, 2013 - 5:45AM

    Why speculate negative and without any logic! Pakstan will proceed with the Gas project with Iran becaus this is in its National interest. Saudi Government will not have any objections but instead support Pakistan endeavours towards modernisation. Pakistan will also abstain from entering into any new cooperation projects with the USA and instead improve its business relations with the European Union especially the federal republic of Germany which is a leading country on clean energy and committed to shut down its Nuclear Plants.

    Rex Minor

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  • Polpot
    Jun 11, 2013 - 6:06AM

    @Jibran: Brother, your pain and anguish is touching.
    ++++++++++++++++++++++++++++++++++
    Why does the Pakistani Govt not buy electricity from India, China and other neighbors.
    The need is now not a few years down the road.

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  • gp65
    Jun 11, 2013 - 6:25AM

    The above two comments are not mine. Some one is using my moniker. I would request the ET mods to put in place a system to identify people correctly. Times of India has recently installed a new state-of-the-art system whereby finger prints and retina scans are obtained to confirm identity before one’s comments are published.
    Secondly, not involving India is hurting the gas project financially. After all, Iran and Pakistan are both ”developing” countries.

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  • gp65
    Jun 11, 2013 - 7:02AM

    @Rex Minor: “Why speculate negative and without any logic! Pakstan will proceed with the Gas project with Iran becaus this is in its National interest. Saudi Government will not have any objections but instead support Pakistan endeavours towards modernisation. “

    Please read this http://tribune.com.pk/story/548497/on-foreign-front-pml-n-will-revisit-foreign-policy/

    Specifically “We will have to see whether the initiative was genuine or just a political gimmick by the Pakistan Peoples Party,” he argued, adding that the PML-N administration would analyse whether the IP project was economically viable and ‘whether it will damage our relations with other countries’.”

    The speculation is in no way unfounded or illogical. It is based on statement given by the ruling party.

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  • Analyzer
    Jun 11, 2013 - 9:29AM

    I think rulers of Pakistan don’t remember the history.
    In 1965 full scale war with India Iran Provide all kind of support like providing Armaments, jet fighters, Fuel & hand over its air space to Pakistani Air force.

    Iranian Air force took the control of Karachi and Arabian sea & Iranian navy was also there to secure Pakistan.

    Iran is more friendly with Pakistan then China and any other country.

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  • Israr Raja
    Jun 11, 2013 - 10:50AM

    @Falcon:
    Where was Iran last 10 years, busy in trying to grab more price from poor Pakistanis,why now Iranians are upset.

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  • unbelievable
    Jun 11, 2013 - 4:13PM

    You don’t have the money to build the pipeline – you don’t even have the money to buy the pipeline gas – so why is anyone surprised that the pipeline isn’t being built? BTW – building an enormously expensive pipeline though some of the most dangerous territory on the planet wouldn’t be considered a wise decision by most business professionals. Factor into the decision equation that Iran is under international sanction and has a history of closing it’s Pakistani border and trade and the IP decision looks foolish.

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  • Rex Minor
    Jun 11, 2013 - 4:40PM

    GP65,

    I do not usualy communicate with robots or with numbers and are expert in plagarism! I use Hegel speculative logic, instead of relying on press reports or media and this is more accurate in forecasting future actions of the leaders. Anyone with a sound common sense( Nawaz Sharif has above average intelligence) would look at the viability of the project as well as take into consideration the deficit of trust with India whose recent violations into the air space gave a taste to the new Prime Minister. The project in my view is a viable one and without the involvement of other takers. .

    Your analysis ignores the extraordinary entrepreneurical quality of the current leaderership in Pakistan and his experience as a Statesman!! Besides, Indians national interests are solely built on economic aspects, whereas other Nations consider humanism, ethics, morality and above all traditional and cultural values.

    Rex Minor

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  • gp65
    Jun 11, 2013 - 11:48PM

    @Rex Minor: Trust deficit with India has nothing to do with IP pipeline. Now I understand why so many of your posts are so uninformed – you do not ‘rely on press reports or media’ and consequently your conclusions are fact free.

    you are one of the rare people who believes that Saudi Arabia would be supportive of this project with Iran without any substantiation. You also issued an edict that it is in Pakistan’s national interest -maybe it is but I would be very surprised. When Pakistan has no money to pay for either the pipeline or gas, even Sui gas pipeline is constantly being blown up due to insurgency in Balochistan and the project would alienate the 2 countries that Pakistan depends on greatly (US and Iran) plus other sources of gas are available – we live in a gas surplus world not one with gas shortage it is certainly not evident that this project is viable.

    Other than your reflexive hatred of US and the pleasure it would give you to tweak US, there is no rationale for you being so sanguine about a project which has failed to take off the ground in 18 years.Recommend

  • Zee Man
    Jun 11, 2013 - 11:48PM

    The Gov’t should not delay this Extremely Important Energy related project. If they do delay it further, Iran can and will cancel this project. The whole world is starved for energy and Iran can sell it to anyone, converting it to LPG or even just in butane gas cylinders, they can ship gas to anyone around the world. Iran is showing extreme patience and if there patience runs out, they can cancel it, just like that. And it seems like they are at there last leg of patience before cancelling this agreement.

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  • Mazher Mehboob
    Jun 12, 2013 - 12:15AM

    Ask Baluchistan govt to have the reins of this project :) empower them

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  • Baghram
    Jun 12, 2013 - 4:20AM

    @ gp65
    Man, take a break! This does not concern you as an Indian. This decision is for the Pakistanis and should be taken by the Pakistanis. Is this what you do all day? Read every bit of detail about Pakistan and then complain Pakistanis are obsessed with India? @ ET mods : PLEASE LET ME COMMENTS GO THROUGH!

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  • Rex Minor
    Jun 12, 2013 - 6:05PM

    ET mods.

    I do not object to media Mods deleting comments which violate the international standards of communcations culture, but do consider your sensoring regime more or less petty fogging.
    GP65 is as much a foreigner as I am and although being a nonbeliever I find her a bit problematice, but I must have the option to respond.
    These people have ‘Angst’ from the muslim folks because of their ancestors experience, and usualy are prepared to accept any crap from the media which is anti-muslim: So give us a chance of resonse to correct their delusion.
    Thank you.

    Rex Minor

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  • Truth
    Jun 12, 2013 - 10:11PM

    Why wasnt this deal completed by PPP in 5 years, just leaving it for next government. Honestly, many like minded are not in favor of Iran- Pakistan gas deal because its not the energy crisis, its the payment Crisis. Pakistan have enough resources to deal things right now. All we require is government to honestly resolve this payment crisis and plan Nuclear Energy Projects, new Dams and power plant like Thar Coal.

    I think that Iran was able to pull Zardari & many of his chronies into this deal because they share same sect of Islam (Shia). This deal is useless and will only trap Pakistan nation paying other nation their hard earned money.

    NO TO IRAN – PAKISTAN GAS PROJECT

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  • truthbetold
    Jun 12, 2013 - 11:28PM

    @Rex Minor:

    “Besides, Indians national interests are solely built on economic aspects, whereas other Nations consider humanism, ethics, morality and above all traditional and cultural values.”

    I am not sure what humanistic, moral, traditional and cultural values that Pakistan called upon when it decided to commit genocide and of East Pakitanis and the continued oppression and massacre of the Baloch.

    I am sorry to bring this up on this topic, but you made some very sweeping claims that needed to be questioned.

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  • sinbad
    Jul 20, 2013 - 8:50PM

    The Pakistan Government is owned by the Americans.

    Recommend

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