In limbo: Iran takes back pipeline financing deal

Published: December 13, 2013

Pakistan would also start offshore drilling by March next year. PHOTO: FILE

ISLAMABAD: 

Iran has backed out of the $500-million financing deal committed for the Iran-Pakistan (IP) gas pipeline project due to constraints following possible sanctions by the United States (US), bringing the process of awarding the contract to Tadbir, an Iranian energy firm, to a halt.

While addressing a press conference, Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi said the project has not progressed due to the sanctions.

Abbasi said that the Iranian oil minister, during his visit to Tehran, had stated that the country was being unable to provide financing, which they had previously offered in two tranches of $250 million each, to lay Pakistan’s portion of the gas pipeline.

“However, we are committed and will make the IP gas pipeline,” Abbasi said, adding that the Iranian side said that they were ready to provide gas to the pipeline, once completed. He said that Iran had laid part of the pipeline by investing $2 billion to transport gas to Pakistan.

He added that the Pakistani side had informed the Iran that US sanctions had affected the IP gas pipeline project and no financier or contractor was ready to participate in the project.

“The compressor equipment required is provided by only two companies, and would not be available due to sanctions against Iran,” he said, adding that the issue would be resolved if US sanctions are lifted. He said that several projects in Iran were also facing sanction threats and some relaxations had been given to Iran.

Abassi said that working groups of two countries had been set up, which would meet next week to re-establish the project by proposing different parameters, adding that the groups would finalise these within two months.

He said that the project cost, if the contract was awarded to the Iranian firm was higher, but Iran had said that Pakistan was not bound to award the contract to the Iranian firm. “We can award it to anyone,” Abassi reiterated.

Speaking about the import of Liquid Natural Gas (LNG), he said that Qatar had asked Pakistan to give confirmation regarding the LNG-terminal and whether the government was going to award the contract to Engro Vopak Terminal Limited.

“Pakistan has designated Pakistan State Oil (PSO) and Qatar had designated Qatar Gas, and the two sides would meet to discuss pricing and other issues,” he said, adding that Qatar needed to assess Pakistan’s financial position to pay the gas price and the potential of LNG in Pakistan. He said that the US had committed LNG supply to India, Japan and China till 2018 and, therefore, had no supply for Pakistan till that time.

He said that government was ready to give 390 million cubic feet per day (mmcfd) of gas to the CNG industry and they could also import themselves. The government would facilitate the CNG industry and had asked it to negotiate the LNG price, Abassi added.

“The government will compensate for Unaccounted for Gas (UFG), while transporting LNG to the CNG industry by gas utilities,” he said.

He maintained that the government was also working on the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline project to bridge gas shortfalls in the country, while the first supply of imported LNG would be available in November 2014.

The minister also said that Pakistan will commence off-shore drilling by March 2014.

Published in The Express Tribune, December 13th, 2013.

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Reader Comments (15)

  • d
    Dec 13, 2013 - 1:35AM

    You can’t take back what was never offered in the first place. Two quotes to prove my point:

    “We did not make such a commitment to help Pakistan with $2 billion for the construction of the pipeline,” Majedi said, quoted by Fars news agency.
    Iran’s deputy oil minister, Ali Majedi
    http://www.dawn.com/news/1054058/iran-says-pakistan-must-finance-own-gas-pipeline

    “Some people are just fond of laying foundation stones even though there was no financial close and no clues of funding,” – Ishaq Dar.
    http://www.dawn.com/news/1062034/dar-expects-payment-of-csf-in-four-weeks

    What I want to know is why ET continues to play up this fiction that Iran offered to finance Pakistan’s end of the deal?

    Recommend

  • Wali
    Dec 13, 2013 - 2:27AM

    There you go… Barely a couple of days after the visit from our “high powered” delegation’s visit with a cap in hand… We are slapped in our faces… Fir the leaders we elect and where we stand in the world this is what out worth is!

    Recommend

  • Hedgefunder
    Dec 13, 2013 - 2:44AM

    So much for Pipe Dreams ! Dream on, as this Nation of Fools have simply lost any ability to face reality or practicalities !
    Let’s not even discuss Finances, as they simply have no idea as to how to generate it, except Begging !

    Recommend

  • Raj - USA
    Dec 13, 2013 - 3:19AM

    This news says that Iran has invested $2 billion for laying the IP pipeline on its side.

    Earlier news articles in ET on the IP Pipeline have mentioned that:

    (1) Iran had invested $750 million to lay the pipeline on its side

    (2) If Pakistan does not complete the pipeline on its side and start to buy the contractual volume of gas from Iran by Dec. 2014, Pakistan shall pay Iran the price for the contracted volume according to the “Take or Pay” clause. This payment would a amount to $ 3 million / day.

    (3) Either Party can get out of the contract at any time by paying the other Party the sum it has invested in laying the pipeline on its side. So, Pakistan can get out of the IP pipeline contract and need not pay the damages of $3 million / day under the “Take or Pay” clause if Pakistan makes a lump sum payment of $750 million, the amount Iran has spent for laying the pipeline on its side.

    Then comes the news of the anonymous donor offering $1 billion investment in this project.

    Then comes the Government’s amnesty scheme that no question will be asked if anyone brings in money from abroad for investment in Pakistan.

    Add up all together.

    The amount of $750 million that Pakistan needs to pay Iran to get out of the IP pipeline contract shall be inflated to $2 billion. Government of Pakistan will pay Iran $1 billion and the anonymous donor may bring in $1 billion to be paid to Iran. Iran will get $2 billion which the anonymous donor and Iran will share $ 1 billion each. The anonymous donor may even invest it in Iran or Pakistan government may say that they have to remit the $1 billion
    to Iran’s secret accounts somewhere else, when in fact, the money would flow to the anonymous donor. Everyone benefit. Iran gets $250 million more and the anonymous donor is able to move his money to some other secret bank account and escape scrutiny. His black money is whitened legitimately and also moved to other bank accounts abroad.

    In any case, it looks like Iran has already initiated steps to claim damages from Pakistan foreseeing eventual default of performance by Pakistan on the IP pipeline contract.

    Interesting to note that vastly different amounts have been quoted as investment required for the IP Pipeline. These amounts have ranged for a total of $ 1.5 billion to $3 billion to $ 7 billion. It is useful and prudent to keep everyone guessing and confused.

    The bottom line: No government in Pakistan had an interest in the IP pipeline at any time.

    Recommend

  • Raj - USA
    Dec 13, 2013 - 3:19AM

    This news says that Iran has invested $2 billion for laying the IP pipeline on its side.

    Earlier news articles in ET on the IP Pipeline have mentioned that:

    (1) Iran had invested $750 million to lay the pipeline on its side

    (2) If Pakistan does not complete the pipeline on its side and start to buy the contractual volume of gas from Iran by Dec. 2014, Pakistan shall pay Iran the price for the contracted volume according to the “Take or Pay” clause. This payment would a amount to $ 3 million / day.

    (3) Either Party can get out of the contract at any time by paying the other Party the sum it has invested in laying the pipeline on its side. So, Pakistan can get out of the IP pipeline contract and need not pay the damages of $3 million / day under the “Take or Pay” clause if Pakistan makes a lump sum payment of $750 million, the amount Iran has spent for laying the pipeline on its side.

    Then comes the news of the anonymous donor offering $1 billion investment in this project.

    Then comes the Government’s amnesty scheme that no question will be asked if anyone brings in money from abroad for investment in Pakistan.

    Add up all together.

    The amount of $750 million that Pakistan needs to pay Iran to get out of the IP pipeline contract shall be inflated to $2 billion. Government of Pakistan will pay Iran $1 billion and the anonymous donor may bring in $1 billion to be paid to Iran. Iran will get $2 billion which the anonymous donor and Iran will share $ 1 billion each. The anonymous donor may even invest it in Iran or Pakistan government may say that they have to remit the $1 billion
    to Iran’s secret accounts somewhere else, when in fact, the money would flow to the anonymous donor. Everyone benefit. Iran gets $250 million more and the anonymous donor is able to move his money to some other secret bank account and escape scrutiny. His black money is whitened legitimately and also moved to other bank accounts abroad.

    In any case, it looks like Iran has already initiated steps to claim damages from Pakistan foreseeing eventual default of performance by Pakistan on the IP pipeline contract.

    Interesting to note that vastly different amounts have been quoted as investment required for the IP Pipeline. These amounts have ranged for a total of $ 1.5 billion to $3 billion to $ 7 billion. It is useful and prudent to keep everyone guessing and confused.

    The bottom line: No government in Pakistan had an interest in the IP pipeline at any time.Recommend

  • Raj - USA
    Dec 13, 2013 - 3:25AM

    “Pakistan has designated Pakistan State Oil (PSO) and Qatar had designated Qatar Gas, and the two sides would meet to discuss pricing and other issues,” he said, adding that Qatar needed to assess Pakistan’s financial position to pay the gas price and the potential of LNG in Pakistan.”

    Very insulting statement from Qatar.

    Recommend

  • masialu
    Dec 13, 2013 - 4:08AM

    Only leaders with vision can make decisions for the betterment of its people no matter who is putting the pressures to decide otherwise.The leaders we have don’t have that vision.

    Recommend

  • Khan
    Dec 13, 2013 - 4:11AM

    Where are the big promises made by Nawaz Sharif before election, he even promised bullet train?

    Recommend

  • Raj - USA
    Dec 13, 2013 - 4:42AM

    According to this news item, Qatar has refused to supply LNG to Pakistan. Qatar says that it has no LNG available for Pakistan until the year 2018 as it has committed its LNG supplies to India, Japan and China.

    How many times have we not heard Pakistan saying that the Gulf oil and gas kingdoms should cut off energy supplies to India. Hamid Gul said in a TV discussion two things need should be cut off for USA. One is oil supplies from the Middle East and the other is Pakistan’s NATO supply routes to Afghanistan. Little did Pakistanis know at that time that the oil and gas kingdoms are cutting off energy supplies to Pakistan.

    It was Pakistan that pushed India out of IPI pipeline. Read the news and statements from Musharraf and other Pakistani politicians at that time. Serves Pakistan right.

    Recommend

  • rkfrom ny
    Dec 13, 2013 - 5:19AM

    ..always dependent on alms from others..!!

    Recommend

  • Zaida P
    Dec 13, 2013 - 8:36AM

    Really ! How can a nation survive by begging from anyone in sight? Pathetic !
    But one look at the DHAs and one would think that Pakistan is a wealthy nation !!

    Recommend

  • LOL
    Dec 13, 2013 - 9:40AM

    Where is that $1bn from a “friendly” country that ET’s “excellent” source revealed?

    Recommend

  • Dec 13, 2013 - 9:44AM

    This is a sad ending to a pinnacle of hope leading to improvement in the economic condition of this country. Our leaders really know how to rob the citizens off economic benefits and friends of trust. Salams

    Recommend

  • Ali Tanoli
    Dec 13, 2013 - 5:44PM

    our neighbour browsky is in its true colour now for six months after that again come back to beging thats there history and chabahar port is building against pakistan economy with the help of india what a browsky….

    Recommend

  • polpot
    Dec 13, 2013 - 6:11PM

    Hafeez Sayeed
    ++++++++++++
    Pls take out a huge procession against Iran.

    Recommend

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