China willing to finance Pakistan’s portion of IP pipeline

Published: November 3, 2016

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.

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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.

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“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.

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Reader Comments (11)

  • Dr Tauseef
    Nov 3, 2016 - 9:18AM

    Okay. Lets build it then.
    Long Live Pakistan. Recommend

  • imran
    Nov 3, 2016 - 9:19AM

    for every problem of Pakistan solution is CHINA.
    CHAINA CHAINA..Recommend

  • Sonya
    Nov 3, 2016 - 10:00AM

    Why don’t you say that the project was halted on the order of an Arab friend.Recommend

  • Ahad
    Nov 3, 2016 - 4:04PM

    USA and Saudis dont want that. As a slave we have no other choice. China pays for us but the masters remain US and Saudis.Recommend

  • genesis
    Nov 3, 2016 - 4:33PM

    After completion and since China has paid for it why not turn the pipe towards China along with the CPEC.Pakistan can the deploy its security to safeguard the pipeline so that gas can flow uninterrupted to China.There is no charity in this Look deeper.Recommend

  • M.Sethi
    Nov 3, 2016 - 6:53PM

    Indeed no doubt China has proven to be a all weather friend of Pakistan. But is it wise to put all your eggs in one basket ?

    Don’t think so ! Recommend

  • Mr Obvious
    Nov 3, 2016 - 9:35PM

    If China is willing to finance then it’s clear that USA sanctions don’t apply – both China and Russia backed away from the project specifically because USA would sanctions their banks. Before signing another “exclusive” deal with China maybe it’s time to take a step back and renegotiate the IP – does the existing supply agreement make any economic sense? I have never read an article where any author has been able to quantify the fully loaded cost of Iranian gas … that’s kinda scary given the major investment in a pipeline. Recommend

  • realist
    Nov 4, 2016 - 4:59AM

    “China wiling to FINANCE

    Finance at 35% rate of return?Recommend

  • auginpk
    Nov 4, 2016 - 6:52AM

    Embrace is getting tighter.Recommend

  • G. Din
    Nov 4, 2016 - 5:59PM

    China is turning into a loan-shark. Too tight an embrace can asphyxiate you!Recommend

  • Irfan Alam
    Nov 10, 2016 - 3:34PM

    Indeed, it is a true hallmark of a sincere friend, to move in and help when the whole world walks out on you. China has done exactly that, by financing a part of the Pakistani stretch of the IP pipeline. There can be no doubt that the China-Pakistan friendship is hightier than the mountains and deeper than any ocean one can think of.Recommend

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