Financing needs: IP gas pipeline – Russia catches Pakistan’s eye

Published: March 20, 2012
Cost of the project is likely to rise to around $1.5 billion compared to earlier estimates of $1.2 billion. PHOTO: FILE

Cost of the project is likely to rise to around $1.5 billion compared to earlier estimates of $1.2 billion. PHOTO: FILE


As a Chinese bank has backed off from financing the $1.5 billion Iran-Pakistan gas pipeline project amid pressure from the United States, Russia has caught the attention of Pakistan, which is planning to explore this viable option first.

The decision to negotiate a deal with Russia came in a recent meeting of the sub-committee formed by the Economic Coordination Committee (ECC) of the cabinet.

Earlier, Russia had offered Pakistan that it would fully finance the pipeline if its energy giant Gazprom was awarded the contract without bidding during a four-day visit of Foreign Minister Hina Rabbani Khar to Moscow in February. In order to give its assent to the offer, the government will have to waive Public Procurement Regulatory Authority (PPRA) rules – designed to ensure transparency in government dealings.

“A delegation will visit Russia soon to negotiate a deal with Gazprom,” Petroleum Secretary Ijaz Chaudhry told The Express Tribune. Recently, he said, the ECC sub-committee had considered different options for going ahead with the vital gas pipeline project.

“No decision, however, has been taken yet to award the contract to Russia, but Pakistan will discuss this option,” he clarified.

Chaudhry also dispelled perception that the Industrial and Commercial Bank of China (ICBC) had distanced itself from the project and said “we have written a letter to ICBC, asking it to clear its position as financial adviser to the project.”

The Inter-state Gas Systems (ISGS) had signed a deal with financial advisers for raising funds for the project, except for ICBC which was in the process of taking approvals.

“It is apprehended that a probable reason for not signing the agreement could be geo-political situation in the region,” said a summary tabled before ECC.

Earlier, the sub-committee had considered approaching China and Russia to seek financial assistance for the project. However, Russia now appeared to be leading the race, a ministry official said, adding the committee also studied the Iranian offer of $250 million for constructing the pipeline.

Under the project, an 800-kilometre-long pipeline will be laid from the Iran-Pakistan border to Nawabshah.

According to sources, the project has entered implementation phase and work on front-end engineering and design, feasibility and detailed route survey has already got under way. A joint venture of Germany’s ILF and Pakistan’s Nespak is doing the engineering work and survey, scheduled to be completed by June this year.

Cost of the project is likely to rise to around $1.5 billion compared to earlier estimates of $1.2 billion. ECC has set a debt-to-equity ratio of 70:30 for the project with the government holding majority shares on the equity side.

According to the ECC summary, tender documents have been issued to pipeline suppliers while for engineering, construction and procurement (ECP) contractors and compressor station suppliers, tender details are being finalised, which will be issued in a couple of months. These contracts are expected to be executed in the second and third quarter this year.

Published in The Express Tribune, March 20th, 2012.

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Reader Comments (16)

  • Qasim
    Mar 20, 2012 - 11:35AM

    Give it to Russians, spread the risk. It is a golden opportunity to make amends with Russians. The economic interests could be leveraged for bilateral relations.


  • R.N.Kiani
    Mar 20, 2012 - 11:53AM

    I am loosing hope in this really and this venture also seems just a ghost Hunting nothing else cz No other options r left for financing and still the Gvt saying “we have not decided yet” seems funny in a case where already “Russia had offered Pakistan that it would fully finance the pipeline if its energy giant Gazprom was awarded the contract without bidding during a four-day visit of Foreign Minister Hina Rabbani Khar to Moscow in February”.


  • Atif
    Mar 20, 2012 - 1:18PM

    When the Goverment says “we shall decide ” it means that kickbacks have not been agreed to …


  • Mar 20, 2012 - 2:02PM

    Don’t really think that this pipeline is ever going to be a reality!


  • Cautious
    Mar 20, 2012 - 2:02PM

    Sounds like another “made in Pakistan” article — until you read this on the BBC, CNN etc I wouldn’t put much credence in Russia bailing Pakistan out — doesn’t pass the smell test.


  • Mar 20, 2012 - 2:14PM

    Russia, Iran and Pakistan should form an alliance against savages, and this project must be complete whatever the cost we have to pay


  • Zavia
    Mar 20, 2012 - 4:29PM

    I prefer Russia over Iran.


  • Abdul Rahman Khan
    Mar 20, 2012 - 6:31PM

    This project has got to be completed by all means and show to america that pakistan is not her client-state to obey her dictates.


  • Hakeem
    Mar 20, 2012 - 7:31PM

    Last time I heard Iranians were offering to finance Pakistan part of implementation?


  • MarkH
    Mar 20, 2012 - 9:05PM

    @Abdul Rahman Khan:
    That might work if you um… actually weren’t and it was just an image blemish or a rumor. Your nukes are the only things that really separate you from a third world nation and those aren’t even looked at by people the same way they look at other countries who have them though you try to act like they do.
    Your priorities are so messed up it’s almost painful to watch if it wasn’t for those publicized hate rallies making it put a grin on peoples faces.


  • Mar 20, 2012 - 9:33PM

    We cannot depend on Russia. We created strategic assets to fight them and now how they believe us to provide security to their men and material in a hostile land. Even our armed forces not know who is killing whom in our border areas.


  • TN, Advocate
    Mar 20, 2012 - 9:59PM

    Thar has at least 5TCF of coal bed methane gas!
    Can’t understand why we are not exploring the local gas. I am sure that Americans and other western countries will finance the Thar project.


  • Hadi Ansari
    Mar 20, 2012 - 10:20PM

    Iran gas project must be treat as short term because by the time it is (IF) completed,with the
    growth of demand Pakistan will be back to square one.Sharp focus is needed to develop and harness energy from wind turbine and solar panels.
    Why not allow domestic and small industries to go solar at their cost with duty free import of
    solar panels if not indigenously available .Thar coal is another project with long term benefit.


  • Nader Junaid
    Mar 20, 2012 - 11:25PM

    “There are no permanent allies, no permanent friends, only permanent interests”, is a cliché which quite often describes the behavior pattern of nations. This is because it is the interest of a nation that governs its behavior in a given situation. Therefore the interests of a nation remain paramount. The status allies and enemies keep changing depending on what suits the nations interest best”.


  • Confused NJ
    Mar 21, 2012 - 12:36AM

    @ Nader Junaid

    Could not agree more. Did we not spend the 80’s believing the Bull fed to us that the Russians were looking for a Pipeline to warm waters via Afghanistan. We sacrificed the growth decades and countless life’s and now want the Russians to finance the pipeline that America is opposing. How ironic indeed! the problem is there is no accountability for the folks who feed us this crap and we believe them and I would not be surprised if this is another wasted decade.


  • JJ
    Mar 21, 2012 - 9:57AM

    Much needed energy. Times have changed. Sounds like a solution. Go for it. Way to go!


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