Pak portion of Iran gas pipeline to cost $1.2b

KARACHI: The Pakistani segment of the gas pipeline from Iran will cost $1.2 billion and work will be completed in four years, an official said.

Managing Director Interstate Gas Systems, Naim Sharafat, said the project is planned to be funded through a debt-equity ratio of 70:30, requiring debt financing of $872 million and equity investment of $373 million. The Interstate Gas Systems is a joint venture of Sui Southern Gas Company and Sui Northern Gas Pipelines.

He was giving a presentation to the Senate standing committee for Petroleum and Natural Resources on the status of Iran-Pakistan gas pipeline project at the Sui Southern Gas Company (SSGC).

This was the first Senate committee meeting at the SSGC since Iran and Pakistan inked the historic agreement in Tehran in June for the supply of natural gas from 2015.

Chairman Standing Committee Sabir Ali Baloch chaired the meeting, which discussed salient features of the 1,150-kilometre  pipeline that will connect Iran’s South Pars gas field with Balochistan and Sindh provinces.

Sharafat said the project’s debt portion is expected to be secured from domestic and international financiers including Sindh and Balochistan governments, Sui Southern Gas Company, Sui Northern Gas Pipelines, Oil and Gas Development Company, Pak Petroleum, Pak-Arab Refinery Company and National Bank. The NBP will contribute $190 million or 51 per cent of equity structure.

Besides, potential private investors include Petronas of Malaysia and Gazprom of Russia which will contribute $183 million or 49 per cent of the equity structure.

Further elaborating, Sharafat said Pakistan will construct about a 780-kilometre 42-inch diameter pipeline from the border, traversing along the Makran Coastal Highway to connect with existing gas transmission network at Nawabshah. Almost 665 km of the pipeline will pass through Balochistan while about 115 km of the pipeline will be laid in Sindh.

He said under the Gas Sale and Purchase Agreement (GSPA), Pakistan will import 750 million cubic feet per day (mmcfd) of gas with a provision to increase it to one billion cubic feet a day (bcfd).

The senators suggested that the stakeholders in the pipeline routes must be taken into confidence, majority of which are remote and less-developed areas, with clear-cut assurances about providing new schools, hospitals and vocational training centres.

In response to queries, the MD Interstate Gas Systems said being one of the largest infrastructure projects, the Iran-Pak pipeline will create new job opportunities in the provinces of Balochistan and Sindh, thus improving income level and standard of living of citizens.

Sharafat stated the Gas Sale and Purchase Agreement was broad enough to allow force majeure in the event the project is hampered due to United Nations sanctions on Iran. He said in case the project does not materialise, a liquefied natural gas terminal will be set up at Gwadar to allow re-gasified LNG to the system.

Giving the current status of the project, Sharafat said a detailed route survey was in progress to pave the way for engineering and design of pipeline facilities.

Later talking to media, the chairman Senate committee said it was important that the project start as soon as possible to bridge the rising natural gas demand-supply gap.

Published in The Express Tribune, July 8^th, 2010.