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.