IP gas pipeline: Russia agrees to financial and technical assistance

Due to US pressure, Pakistan may accept technical assistance only.

ISLAMABAD:

While refusing to succumb to pressure from the United States (US), Russia has agreed in-principle to extend financial and technical aid to Pakistan for the $1.5 billion Iran-Pakistan (IP) gas pipeline project.

However, Pakistan has not yet received a response from a Chinese bank that was to sign a contract as the IP gas pipeline project’s financial advisor.

Sources told The Express Tribune that a sub-committee of the Economic Coordination Committee (ECC) – which met on Friday to review the progress of IP gas pipeline project – was informed that Russia had agreed to extend financial and technical support for the project. Talks between the two countries were recently held in Moscow, and Russia will respond formally to Pakistan within a fortnight.

During the meeting, the body also finalised proposals that would be sent to the ECC for formal approval. The ECC will be recommended to refuse financing from Russia, and accept only technical assistance due to resistance from Washington.

“Pakistan can generate funds through [the] Gas Infrastructure Development Cess (GIDC) imposed on natural gas to finance the project, and only technical assistance may be sought from Russia,” a government official said.

Secretary Petroleum Ijaz Chaudhry told The Express Tribune that a Pakistani delegation had given a presentation to Russian authorities in Moscow over the length of the pipeline, gas volume and financing required for project.

Pakistan had decided to explore the possibility of Russia backing the project after a Chinese bank hinted at staying away from the project amid pressure from the US. The decision to negotiate a deal with Russia was also taken by the sub-committee formed by the ECC.

“We have just given [a] presentation and Russia will convey its response soon,” Chaudhry said; adding that the sub-committee decided that Pakistan will go ahead with the project even if Russia and China do not provide funds.

He said that no final decision has been taken as yet; the sub-committee had been tasked with examining different proposals from Russia, China and Iran, and progress reports in this regard were examined in the meeting. “We are still negotiating with [the] Chinese bank, which has given no final response regarding [the] role of financial advisor on [the] IP gas pipeline project,” he said.

Earlier, Russia had offered Pakistan full financing for the pipeline during a four-day visit of Foreign Minister Hina Rabbani Khar to Moscow in February. The condition was that Russian energy giant Gazprom be awarded the contract without bidding.

In order to give its assent to the offer, the government will first have to waive the Public Procurement Regulatory Authority (PPRA) rules, which were designed to ensure transparency in government dealings.

Under the project, an 800-kilometre-long pipeline will be laid from the Iran-Pakistan border to Nawabshah. The project has entered its implementation phase, and work on front-end engineering and design, feasibility, and a detailed route survey is already underway. A joint venture between Germany’s ILF and Pakistan’s Nespak has been tasked with the engineering work and survey, which is scheduled to be completed by June this year.

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

Published in The Express Tribune, April 7^th, 2012.