An Iranian firm has expressed interest in completely financing and constructing Pakistan’s segment of a gas pipeline that will come from Iran, an offer that comes after cancellation of a $500 million loan by Tehran earlier.
According to sources, Pakistan has got the offer from Jahanpars Engineering and Construction, which could undertake entire engineering, procurement and construction work and provide $1.8 billion for the Iran-Pakistan (IP) gas pipeline project.
The company has expertise in engineering works and has the capacity and reputation to engage in mega infrastructure projects.
However, the gas pipeline is a project between governments of the two countries, which will be implemented through their nominated entities. Therefore, Pakistan has asked the management of Jahanpars to contact government authorities in Tehran to press on with the plan.
“Working groups of the two countries will consider the financing and construction offer from the company,” a source said.
Earlier, the two sides had agreed to give the pipeline construction contract to Tadbir Energy of Iran, which in response would provide a $500m loan for laying the pipeline in Pakistan.
However, Pakistan insisted that the contract price negotiated with Tadbir was higher and the contract could not be awarded to it.
During a visit of a Pakistani delegation to Tehran last week, Iran also refused to provide the $500 million loan.
When approached, former adviser to prime minister on petroleum and natural resources Dr Asim Hussain, who had pursued the project, said they had convinced the Iranian government to provide $500 million for the pipeline.
“We had also left $470 million in the national exchequer to fund the project,” he said, adding now the new government should develop required infrastructure.
“Although the contract price was higher, there was no other option. This is not a time to scrap the deal,” Hussain remarked.
In the long term, the deal would have a positive impact on the country’s economy when compared to consumption of furnace oil, he added.
According to a report prepared by the Ministry of Petroleum and Natural Resources, if furnace oil-based power generation is replaced with imported gas, it will lead to annual savings of $2.4 billion.
It said IP gas would cause just 20% increase in the average gas basket price in the country if 750 million cubic feet per day (mmcfd) is imported.
Under the project, Pakistan will import 750 mmcfd, which could be increased to one billion cubic feet. The Balochistan government seeks 250 mmcfd for consumption at the Gwadar Port and the Centre can go for increased supplies to meet the needs of the province.
Published in The Express Tribune, December 17th, 2013.