IP gas pipeline project brought back to life

Published: November 25, 2013

The Geneva deal between Iran and world powers will also help Pakistan to import oil from Iran, which was suspended in 2010 after the US and European Union imposed sanctions on Tehran. PHOTO: AFP/FILE

ISLAMABAD: The landmark deal between Iran and Western nations has apparently brought the multibillion-dollar Iran-Pakistan (IP) gas pipeline project back to life. Now, Islamabad hopes to invite China and Russia to finance the project that had been in the doldrums.

This deal will also help Pakistan to import oil from Iran, which was suspended in 2010 after the US and European Union imposed sanctions on Tehran. As a result, international banks had also refused to open Letter of Credits to import oil and therefore supplies were suspended.

Officials say the Geneva deal would help Pakistani and Iranian energy ministers, who are scheduled to meet for the first time in Turkey, to resume talks in a positive way.

“We hope the agreement between Iran and the world powers would revive confidence of countries like China and Russia to finance the IP gas pipeline project,” a senior government official said, adding that the Pakistani government has been requesting the US to exempt the project from possible sanctions. During his recent visit to the United States, Prime Minister Nawaz Sharif had also asked the Obama administration to exempt the project from sanctions, but he was noncommittal.

Islamabad has been facing a delay in the important energy project as the government failed in securing funds for the project. The incumbent PML-N government was also forced to request the Iranian government to completely finance the project.

The first gas flow was scheduled for December 2014. However, the possibility of US sanctions caused such trepidation that even the Oil and Gas Development Company Limited (OGDCL) and National Bank of Pakistan (NBP) had refused to provide funding for the project.

A petroleum ministry official said Islamabad had earlier approached Moscow and Beijing for a solvent solution – but even Russian banks backed out. “Now, we are hopeful that those institutions would have some confidence and they would sponsor the IP project after Iran and Western nations inked the agreement,” another official said.

Likewise, Pakistan would now be able to import pipeline material and compressors required for its development. Officials claim that the country can now buy material at competitive rates as the Geneva deal has opened way to award the contract to any party.

As there was no progress on the IP pipeline, Tehran was also unable to develop its South Pars field, the source of the gas supply for the project. “But now, Iran will be able to develop the field by importing technology,” said an official. “Moreover, the Geneva agreement would help improve trade ties with Iran.”

Despite a lot of optimism, some officials are still sceptical. When contacted, one of the senior aides to the prime minister was cautious about drawing any conclusion at this stage. “It is too early to say anything. The impact of the relief in sanctions will be very limited.”

He said Pakistan would continue to observe the situation closely and hoped that the accord on Iran’s nuclear programme would eventually lift all economic sanctions.

Published in The Express Tribune, November 25th, 2013.

Reader Comments (20)

  • unbelievable
    Nov 25, 2013 - 3:36AM

    The landmark deal between Iran and Western nations
    .
    I doubt China or Russia consider themselves “Western nations”.

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  • Baji Jee
    Nov 25, 2013 - 3:42AM

    Well done Iran and Pakistan….BTW I already smell some people burning from that gas :P

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  • It Is (still) Economy Stupid
    Nov 25, 2013 - 4:44AM

    What a country it claims it can build high tech atom bomb, missile, JF17 but can not make few feet diameter of steel pipe for oil. It does not require any high tech technology.

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  • Raja
    Nov 25, 2013 - 5:24AM

    Does this mean that the US/ NAAtO now have an alternative through Iran for their pullout? would that then mean that Pakistan’s usefulness has reduced ?

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  • waqas
    Nov 25, 2013 - 8:02AM

    @It Is (still) Economy Stupid:
    its required money which we dont have

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  • abd
    Nov 25, 2013 - 9:25AM

    IP pipeline is good for journalists. They are always able to turn to it for a new story that will fill up some empty column space. The fact is that the Iranians have given up on this. Their minister said as much. The reason is that Pakistan can’t afford to pay for its share of the project and so there is nothing that can be done about it. I wish our leaders would just stop with this charade and come out and say that it’s not going to happen.

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  • Indra
    Nov 25, 2013 - 10:24AM

    @Baji Jee: We burn because you somehow managed to get oil for yourself? well, its a common thing in India;transporting oil, you see!. Dont forget Farkhor Air Base.Its not there for noo reason. Please progress, dont project comparison on Bharat. Why? simply, because you are not an equal, culturally, politically or economically.Those times are long gone.

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  • roadkashehzada
    Nov 25, 2013 - 10:53AM

    i still believe issuing public bonds/shares is the best solution for funding the project. people can also get direct income from the project directly which will give them breathing space in rising fuel prices

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  • Asad
    Nov 25, 2013 - 4:02PM

    @Indra:
    Baji Jee was smelling it and I just witnessed it.Recommend

  • Zubair Khan
    Nov 25, 2013 - 4:17PM

    When Uncle Saam is happy with Iran any cooperation is welcome. So lesson learnt is always look at mighty when ever and wehere ever it nods go ahead.Recommend

  • Indra
    Nov 25, 2013 - 4:32PM

    @Asad: @Indra:
    Baji Jee was smelling it and I just strong textwitnessed it.

    So you are saying that Bajie Jee is a dog and you are a voyeur? thats it!.Recommend

  • Hari Om
    Nov 25, 2013 - 5:30PM

    If report by ET that it will “now be able to import pipeline material and compressors required” then it would be likely that it would now be able to acquire gas liquefaction technology providing India an opportunity to start gas imports from Iran via the LNG route. For India the LNG option nullifies the risk of having a pipeline operating in security and blackmail fraught Pakistan while also preventing Pakistan from piggy-backing on Indian gas demand to subsidise Pakistani gas infrastructure and consumption.

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  • Hari Om
    Nov 25, 2013 - 5:58PM

    If report by ET that sanctions on “pipeline material and compressors required” have been lifted are indeed true, then it would be likely that sanctions on gas liquefaction technology has also been lifted providing India an opportunity to start gas imports from Iran via the LNG route. For India the LNG option nullifies the risk of having a pipeline operating in security and blackmail fraught Pakistan while also preventing Pakistan from piggy backing on Indian gas demand to subsidise Pakistani gas infrastructure and consumption.

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  • baji jee
    Nov 25, 2013 - 6:37PM

    @Indra: Trust me, that comment was not for our Indian brothers and sisters…but for Iran haters….did not know Indians are also on the list!
    @Asad: LOL

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  • Shakil A Khan
    Nov 25, 2013 - 7:29PM

    There is nothing done from Pakistan government side as Sharifs masters(US, KSA) prefer TAPI over IP line. Now they will not have any excuse but to execute and secure finance for it, but not sure if the lesser master KSA will still be happy about it!

    @Indians here, you object to IPI pipeline on security grounds and why the doesnt apply to TAPI pipeline as it goes through same hostile country too? twisted logic, vested interests or simply order from Uncle Sam?

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  • Last Word
    Nov 25, 2013 - 8:15PM

    US-Iran deal is a good news for India as well. Share market was up 2 percent as India who was the second biggest buyer of oil from Iran, would be able to purchase oil through Rupee payment thus saving precious foreign exchange. Iran gas pipeline through Pakistan may also be revived after this deal.

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  • gp65
    Nov 25, 2013 - 9:21PM

    @Baji Jee:
    Not sure who you thought might burn. India and Iran have much higher trade than Pakistan and India. India and US have good relations but that does not stop India and Iran from good relations. So India would surely be happy for Iran.

    As far as IP pipeline is concerned – pls. talk about it when you find the funding for the pipeline and if Saudi Arabia allows you to build the pipeline. But if you can build it – good luck Pakistan. Why do you think India would be opposed to it.Recommend

  • gp65
    Nov 25, 2013 - 9:53PM

    @Last Word: India had 3 main issues with regards to the IP pipeline and that was the reason it pulled out. ITs pullout happened before the sanctions and is unrelated to it.
    The reasons are:

    1) India did not agree at Iran’s pricing model linked to oil prices

    2) Pakistan was charging very high transit fees and no agreement could be reached on the transit fees.

    3) India soughtcontractual guarantees that pipelines would not be stopped regardless of ups and down of Indo-Pak relations and compensation if militants damaged the pipeline which was initially going o be built with Indian money. Pakistan was unwilling to provide either guarantee.

    So India becoming part of the IP pipeline is now out of the question.Recommend

  • abdussamad
    Nov 26, 2013 - 3:02AM

    @Raja:
    Nope. No other country on the planet will bend over backwards like we do to please the Americans.

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  • CentralParkTarzan
    Nov 26, 2013 - 9:38AM

    @It Is (still) Economy Stupid: …Ask them how did the built Sui Northern Gas Pipeline???

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