Breakthrough: Pakistan to award gas pipeline contracts to Russia

Published: June 28, 2012
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The two sides would
sign a memorandum
of understanding in
next two to three
months to push ahead
with the projects. CREATIVE COMMONS

The two sides would sign a memorandum of understanding in next two to three months to push ahead with the projects. CREATIVE COMMONS

ISLAMABAD: 

Pakistan has agreed to award contracts without bidding for multi-billion-dollar Iran-Pakistan (IP) and Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline projects to Russia, which will also extend financial assistance.

However, in an understanding reached with Russia, Pakistan made it clear that it would award the contracts on government-to-government basis only. Private Russian firms will not be entertained.

“Pakistan’s government will ask the cabinet to waive public procurement rules for award of pipeline contracts to Russia,” a participant of the meeting of Pak-Russia Joint Working Group on Energy told The Express Tribune.

A 15-strong delegation of Russia, led by the deputy minister for energy, participated in the meeting held in Islamabad on Wednesday.

The two sides would sign a memorandum of understanding (MoU) in next two to three months to move ahead with the projects, he said. Third meeting of the joint working group will be held in Moscow in 2013.

The government has already floated tenders, inviting bids for giving contracts for construction and pipeline procurement for the IP project, costing $1.5 billion.

“Russian energy giant Gazprom may also participate in bidding for the engineering, procurement and construction (EPC) contract, which gives an edge to the company that will pledge financing as well,” a government official said, adding Moscow also agreed to finance the rehabilitation of Guddu and Muzaffargarh power plants.

According to sources, Pakistan will submit a draft of agreement for financial and technical assistance for the IP pipeline in 15 days. Though the Russian side assured financial assistance for the pipelines, they did not indicate the amount.

In a preliminary meeting held in Islamabad on Tuesday, the Russian authorities offered cooperation in gas import through pipelines and the Central Asia South Asia (CASA) electricity import project, which would bring electricity from Central Asian states.

Besides Russia, Iran is also willing to provide $250 million on government-to-government basis for constructing the IP pipeline. Pakistan wants $500 million for the pipeline.

Iran has also come up with a plan to lay Pakistan’s portion of the pipeline based on a mechanism called ‘supplier’s credit’, which Pakistan will repay after two years.

Pakistan is also seeking China’s help for the IP pipeline. In a recent visit to Beijing, President Asif Ali Zardari and Adviser to Prime Minister on Petroleum Dr Asim Hussain succeeded in convincing the Chinese leadership to take part in bidding for the construction of the pipeline.

Electricity import

In addition to supporting the gas pipelines, Russia has also expressed its willingness to cooperate in import of 1,000 megawatts of electricity from Central Asia. Leading financial institutions including the World Bank and Islamic Development Bank have committed financial support for the power import project.

Construction of a cross-border transmission line is being considered for creating a dedicated link aimed at supplying surplus hydropower during summer months from Kyrgyzstan and Tajikistan to Pakistan.

Published in The Express Tribune, June 28th, 2012.

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Reader Comments (20)

  • Its (still) Econonmy Stupid
    Jun 28, 2012 - 6:55AM

    Pakistan should talk to Canadians how they got burned by exclusive contracts with Russians. In democracy award of contract without bid is nothing short of dictatorship in the garb of democracy.
    ”Construction of a cross-border transmission line is being considered for creating a dedicated link aimed at supplying surplus hydropower during summer months from Kyrgyzstan and Tajikistan to Pakistan”Sui gas pipeline is hard to protect in the best of times how Pakistan expect the transmission lines to be securded on both sides of the borders?

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  • Not me
    Jun 28, 2012 - 8:54AM

    Tell me why not build more medium size dams to generate cheap hydel energy and why not fast track exploration of coal reserves

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  • Akhtar
    Jun 28, 2012 - 9:46AM

    we got sold out again… the chinese backed down, Iran is under sanctions, US and west are planning to leave the region, and the russians made great profit by stopping open bids. This way they got very low prices and great profit for the pipeline, and also a listening post here. The main concern of Russia is to keep an eye on Pak, as its backyard, central asian countries can be infected by rogue elements sitting here. Further, Russia is India’s time tested and extremely close friend. Its a big strategic mistake.

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  • Lord
    Jun 28, 2012 - 11:06AM

    Too little too late

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  • Waleed Rehman
    Jun 28, 2012 - 11:08AM

    Its good that our policy makers are inclining towards Russia, atleast russians fulfill their commitments, in 70’s and 80’s we were helping US against russia still we got Steel MIlls and Heavy Industries Taxila (HIT) which are still a backbone of our economy and defense. and what US did for us, nothing concrete of this sort, they only provide aid and loan which gets down with drain because of our poor governance and corruption and also 60-70% of this money goes back to them as over heads.
    Pakistan will benefit from this geopolitical and financial maneuver!

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  • Zaki
    Jun 28, 2012 - 11:28AM

    This will help India more than Pakistan. Russians always wanted access to the Indian ocean.

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  • Jun 28, 2012 - 12:54PM

    Hillary will come and stop it.

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  • BlackJack
    Jun 28, 2012 - 2:00PM

    If this is true, it is genuinely good news for India. Both pipelines are fraught with uncertainty, but if the infrastructure is created, at least they can be of use in the future, and will address Pakistan’s energy concerns as well.

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  • Naveed
    Jun 28, 2012 - 2:12PM

    Best thing for Pakistan have have any ties with Russia and it will make a stronger parkistan and a working relationship with a superpower is south Asia what Pakistan needs so badly , and India by working with the us is going to lose this superpower with friends like russia and china and Iran no superpower can touch Pakistan , unsaid need to open it’s eyes and join Pakistan as friends , so even if Russian is going to make alot of money so be it , it’s the best thing for Pakistan in the long run , may Allah be with us

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  • Vigilant
    Jun 28, 2012 - 2:25PM

    It’s best to explore our own national resources than importing. How many governments are failed to construct a single major dam? is just shameful.Recommend

  • Shyam
    Jun 28, 2012 - 5:03PM

    @Naveed
    and India by working with the us is going to lose this superpower

    Russia is one of India’s closest friends. It is giving us an aircraft carrier late this year and a nuclear submarine as well. We are jointly designing the fifth generation fighter aircraft jointly with Russia which is worth much more than all of our deals with Americans.

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  • Jun 28, 2012 - 6:41PM

    Cost of producing energy from various fossil fuels ranges from $2-4 per million BTUs for coal to $19-20 per million BTUs from oil. Costs of energy from natural gas vary widely depending on the source. Cost of shale gas in the United States has plummeted to about $2 per million BTU recently, while Pakistan has signed agreements to purchase gas from Iran and Turkmenistan in the range of $10 to $12 per million BTUs. Cost of production of domestic natural gas is in the range of $2 to $4 per million BTU.

    Instead of addressing different pieces of the energy puzzle in an ad hoc fashion under multiple ministries and bureaucracies fighting turf battles, Pakistani policy makers need to look at the big picture for the sake of the nation’s future. Nothing short of a holistic approach with a comprehensive energy policy formulated and implemented under a competent and powerful energy czar will do.

    http://www.riazhaq.com/2012/06/comprehensive-energy-policy-for.html

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  • Cautious
    Jun 28, 2012 - 8:48PM

    Given the active nature of the SC there is little (if any) chance that they will consider a “no bid” cozy deal with Russia/Gazprom as a legally binding contract. This type of arrangement is a recipe for exorbitant charges and bribery. Further — I question whether this is one of the “made in Pakistan” articles because there is no mention of this on any international news outlets.

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  • ayesha_khan
    Jun 28, 2012 - 10:37PM

    The activist judiciary that not just deals with civil legal and constitutional cases but also gets involved in economic policymaking will take suo moto at some time on this issue also. Just like Pakistan has been dragged to international arbitration for rental power contracts being dishonoured, it will be the same story here.

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  • mpq357
    Jun 29, 2012 - 12:23AM

    @ayesha_khan:
    You are an Indian and is this what you do? Analyze Pakistan and then post comments on it. You hate it, so why come here?

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  • usali
    Jun 29, 2012 - 12:46AM

    The unwarranted bashing of SC even on this post is beyond comprehension. Instead one should demand transparency and transfer of technology in such hefty deals. Co-operation with neighbors is a good sign.

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  • eyespy
    Jun 29, 2012 - 4:11AM

    @mpq357:
    They got nothing better do do apparently. All the “progress” is still plagued by the eastern bloc mentality.

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  • antanu g
    Jun 29, 2012 - 11:51PM

    and people keep commenting that no country is willing to invest in pakistan….guys…as i said earlier…you can hate pakistan or you can love it…but you can not ignore sixth most populous nation on earth.

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  • laldo
    Jul 3, 2012 - 9:56AM

    Close russia & pk relation will be good for india,due to its proximity.Russia is one of India’s closest friends & would’nt harm its relationship with india.
    After USA moves out from AF/PAK Region,russia,india,china & pak will play a major role in development for afghanistan.This close allaince will see central asia within its reach for its oil & natural gas.

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  • mohammed
    Jul 4, 2012 - 3:01PM

    i hope one day soon hindus and muslims, can one day live in peace together,that will be beging of pakistan and india allaince or alley as you call it.look at america and britain, i hope same goes in india and pakistan

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