A friendly country has offered $1 billion in assistance for building the Iran-Pakistan gas pipeline and the financing may be acquired after Tehran inks a nuclear deal with western powers, officials say.
Only top government leadership and the Foreign Office know about the financing offer, but the friendly country’s name has been kept secret.
According to sources, since the Iranian offer for financing and constructing Pakistan’s segment of the pipeline looks expensive, the government is exploring the possibility of going for this alternative financial assistance. Iran has offered $500 million for the project.
They said the present government also wanted to renegotiate with Tehran the agreed gas price and the pipeline construction contract for Iranian firm Tadbir Energy.
When the petroleum ministry’s spokesman was approached for comments on the assistance proposal, he said they had no idea of any offer from a friendly country.
However, officials privately suggest that China may be the country which has shown interest in financing the gas pipeline. Earlier, during the tenure of the previous government, China had offered a loan of $500 million.
A Chinese firm, which had offered the loan, later pulled out of the project after Pakistan refused to extend the bid validity period.
Owing to fierce opposition from the US, former petroleum minister Dr Asim Hussain had taken an initiative to arrange funds for the pipeline from two sources. He won government’s approval to generate $1 billion through the Gas Infrastructure Development Cess, but later a court stopped its collection. Apart from this, Hussain sought financing from Iran, which agreed to extend $500 million.
Pakistan and Iran also initialed an inter-governmental agreement for releasing the funds and awarding the construction contract to Tadbir Energy, which had been designated by Tehran.
“Now, the present government wants to renegotiate gas pricing and the contract with Tadbir Energy during upcoming visit of Petroleum Minister Shahid Khaqan Abbasi to Tehran,” an official said. He is going on an invitation from Iran.
“During the trip, the possibility of Iran providing the entire financing will be discussed,” the official added.
Against the financing, Pakistan would award the engineering, procurement and construction contract to Tadbir Energy.
According to a report prepared by the petroleum ministry, if furnace oil-based power generation is replaced with imported gas, it will result in annual savings of $2.4 billion.
The incremental impact of the gas pipeline would be just 20% on the overall average gas basket price if 750 million cubic feet per day (mmcfd) was imported, it said.
Under the project, which is estimated to cost around $1.8 billion, Pakistan will import 750 mmcfd of gas, extendable to one billion cubic feet. Balochistan wants 250 mmcfd for consumption at the Gwadar Port and it is likely that the central government may opt for higher gas imports to meet the needs of the province.
Published in The Express Tribune, November 28th, 2013.