KARACHI: The government is working on an alternative plan to finance the $1.5 billion Iran-Pakistan (IP) gas pipeline as hopes for funding from Russia fade in the face of mounting pressure from the US to stop the project, says a senior government official.
Earlier, a Chinese bank backed out of financing the vital gas supply project which may ease most of the energy shortage in the country.
“In the alternative plan, the government is studying a joint investment formula, according to which the engineering, procurement and construction (EPC) contractors will be invited to provide some funds for the pipeline,” the official said.
In talks held between Pakistani and Russian officials in the first week of April in Moscow, Pakistan asked Russia to either extend a loan or provide finished products and other material relating to the pipeline. Russia agreed to respond to the proposal in two weeks, but no response has been received so far.
After the return of the delegation from Moscow, the government officials had, however, announced that Russia had agreed in principle to give financial and technical assistance for the pipeline.
“A reminder has been sent to Russia in this regard and it is to reply by April 30,” the official said. Petroleum Secretary Ijaz Chaudhry also confirmed that Russia had not yet responded to the proposal.
Pakistan approached Russia after a Chinese bank hinted at its inability to push ahead with financing the project amid increasing US pressure. Russia offered to finance the entire pipeline during a four-day visit of Foreign Minister Hina Rabbani Khar to Moscow in February.
Moscow linked the proposal with the award of contract to its energy giant, Gazprom, without bidding. However, to give its consent the government will have to waive Public Procurement Regulatory Authority (PPRA) rules, designed to ensure transparency in government dealings.
“Funds will be generated through infrastructure gas development cess and EPC contractor will also be asked to extend some financing,” the official said, adding the government would make it part of the tender for EPC contract.
A sub-committee of the Economic Coordination Committee (ECC) on IP gas pipeline had decided that the government would go ahead with the project even if Russia and China showed reluctance.
In the project, an 800km-long pipeline will be laid from the Iran-Pakistan border to Nawabshah. The project has entered implementation phase and work on front-end engineering and design, feasibility and detailed route survey is under way.
A joint venture of Germany’s ILF and Pakistan’s Nespak has been tasked with the engineering work and survey, which is scheduled to be completed by June.
Published in The Express Tribune, April 25th, 2012.