IP gas project: Who will finance Pakistan’s side of pipeline?

Pakistan and Iran to meet next month to finalise deal on laying Pakistan’s portion.

ISLAMABAD:

As Russia and China have not given confirmed financing the IP gas pipeline project, Pakistan and Iran will resume talks in the first week of September to finalise the arrangement of finance to lay Pakistan’s side of the pipeline.

Russia and China are conducting due diligence of the project although there has been no response so far, said an official.

Pakistan will also urge the Iranian team to double its pledged amount to $500 million during the upcoming meeting of the working group on IP gas pipeline project. “Iran has already committed to raise $250 million financing for the gas pipeline project through its commercial banks,” sources said.

The project is expected to facilitate the import of 700 million cubic feet of gas every day through the 2,100 kilometre pipeline which will ease the current energy crisis in Pakistan.

Iran-Pakistan gas pipeline is expected to reach the zero border point in the first half of next Iranian calendar year beginning 20 March 2013. National Iranian Gas Company (NIGC) Managing Director, Javad Oji in a recent statement, said that work on the 56-inch Seventh Iran’s Gas Trunkline from Iranshahr, southeast of Iran to Pakistan border and Zahedan city is complete and it is expected to come on stream in September 2013.

Coordination committee to meet on Monday

In another group meeting, a special Iranian team will participate in the two-day coordination committee meeting on the IP gas pipeline project scheduled to meet in Islamabad on Monday to review progress of the project.

Pakistan and Iran had formed the joint working body to finalise a deal with the latter to lay Pakistan’s portion of the pipeline during a meeting held in Islamabad on July 17 and 18.

The Joint Working Group comprised experts from technical, legal, financial and commercial sectors to work out details with respect to implementation of the Iran-Pakistan gas pipeline project.

“This group will also examine the impact of US sanctions against Iran on IP gas pipeline project,” sources added. State-owned National Bank of Pakistan (NBP) and Oil and Gas Development Company Limited (OGDC) walked away from the project last year fearing US sanctions. In March this year, the world’s largest bank Industrial and Commercial Bank of China Limited (ICBC) after agreeing to finance Pakistan’s side of the pipeline also shied away.

“If the two countries reach an agreement, Iran would also provide material for the pipeline,” source added.

German based firm ILF has completed detailed engineering design of IP gas pipeline project and according to the interim feasibility report, the cost of the project is between $1.2 and $1.5 billion.

“If the project is materialised with the participation of local companies, the cost of the project fall while the cost would go up if foreign companies complete the project. Sources also hinted that local and Iranian companies could wrap up the project.

Published in The Express Tribune, August 25^th, 2012.