ISLAMABAD: With Iran coming out of decades-long global economic isolation, China has offered Pakistan that it was willing to finance the un-built portion of a multibillion-dollar gas pipeline project.
Officials told The Express Tribune that the China Petroleum Pipeline Bureau (CPPB) – currently engaged with the $1.4 billion Gwadar-Nawabshah LNG terminal and pipeline project – was keen to work on the remaining portion of the gas pipeline from Gwadar to the Iranian border to implement the Iran-Pakistan gas pipeline project.
China was providing 85% of the total financing for the LNG pipeline project and wanted to emulate the same model for building the remaining portion of the pipeline from Gwadar up to the Iranian border.
The IP gas pipeline project had been stalled due to international curbs against Tehran. But soon after lifting of the sanctions, the United States had imposed certain sanctions against Tehran that were hindering the implementation of the IP gas pipeline project.
Officials said China had also expressed its desire to work on the remaining portion of the 80km pipeline from Gwadar to connect it with the Iranian border. China was lobbying to award the contract of this portion as per the cost decided for the Gwadar LNG pipeline.
A senior government official said Pakistan was working on LNG import projects but LNG supply was not a secured source because in case of war, this supply source could be halted.
He said this was the reason why the IP project was considered to be an essential as well as strategic project for Pakistan.
“In case of some interruption in the supply of LNG, Pakistan will be able to get gas supply through the IP pipeline,” the official added.
The other reason was that prices of steel and other material for gas pipelines had dropped over the years. During the last PPP government, Iran had decided to lay the IP pipeline by nominating an Iranian company. Iran had also pledged $500 million financing for the project.
The offer of the Iranian company contract was $2.8 billion. German consultant ILF had estimated the contract cost at $1.8 billion. However, its cost had come down to $1.6 billion since.
The official said the approved cost of the LNG pipeline project by the Executive Committee of the National Economic Council (Ecnec) was $2 billion that included the $1.4 billion EPC (engineering, procurement and construction) cost and $600 million in duties to the government.
He said if the pipeline is extended up to the Iranian border, its cost as per the Gwadar LNG pipeline terms and conditions would come to $1.6 billion.
The official added that the government was working on a plan to set up two jetties at the Gwadar Seaport to deal with 1,200 mmcfd LNG where two floating terminals would be made operational.
The Chinese company would also work on the project as the EPC contractor and China would provide financing for it.
Published in The Express Tribune, November 3rd, 2016.