IP gas pipeline: Iran wants assurance that Pakistan is ‘all in’
Iran once again is pushing the financing issue regarding the Iran-Pakistan (IP)gas pipeline as it assures extending a $500 million loan to Pakistan on the condition that Islamabad will not turn its back on the project.
The Iranian President Mahmoud Ahmadinejad, during a recent visit to Islamabad, pledged $500 million financing for the $1.5 billion IP gas pipeline project, while seeking commitment from Pakistan that it will not back out and complete the project within the scheduled timeframe.
Islamabad plans to avail this financing to acquire engineering and construction materials to lay its portion of the pipeline, which will be carried out in a joint venture with Iranian companies and local gas utilities including Sui Northern Gas Pipelines (SNGPL) and Sui Southern Gas Company (SSGC).
In addition to Iranian financing, Islamabad seeks to avail the buyer’s credit facility to pay for the import of building materials. The government will also raise Rs30 billion during the current financial year through the gas infrastructure development cess (GIDC) – a tax levied on domestic gas consumers.
Sources told The Express Tribune that Pakistani and Iranian teams had finalised the draft of the Inter-Governmental Cooperation Agreement (IGCA).
“We will sign the agreement next week,” sources said, adding that Iranians were concerned about the progress of the project and wanted assurance that there shall be no further delays to lay Pakistan’s portion of gas pipeline so that gas supply can begin in December this year.
“We have assured the Iranian president that the funds will be utilised for construction of the gas pipeline in Pakistan and will be completed in time,” sources said, adding that now all issues have been settled to move ahead on the project.
The agreement says that $250 million will be provided by Iran on a government to government basis, while the remaining $250 million will be wired by Iranian commercial banks. “Tehran has to settle some issues with their commercial banks which will be resolved in the coming week before signing of the finance deal,” sources said.
Pakistan wanted Iran’s signatures on the funding agreement during the visit, but delays in finalisation of the draft resulted in a bottleneck because of the late arrival of the delegation from Tehran.
Pakistan is currently pressured in securing funding from foreign countries and institutions due to sanctions imposed against Tehran over its controversial nuclear programme.
Under the project, Pakistan will import 750 million cubic feet gas per day (mmcfd) extendable to one billion cubic feet gas per day. The Balochistan government wants 250mmcfd for Gwadar Port, therefore Pakistani can obtain more gas from Iran if need be.
German-based consultant firm ILF has already completed a detailed engineering design of the project. According to the interim feasibility report, the project will cost between $1.2 and $1.5 billion.
Published in The Express Tribune, November 24th, 2012.
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We absolutely need regional cooperation. Iran is our brother and we must stand by them against any zionist pressure. Once a few projects like these get finished, people will start seeing that we dont need the west, we have the power, we just dont know it yet or just asleep. People wake up and support this project and demand from the leaders concrete progress in this regard.
Do it .No ifs and buts.It is in best interest of country.
The trick is to play for time: soon the caretaker Govt will be in. +++++++++++++++++++++++++++++++++++++++++ And after that the undertaker Govt.
@Cautious: I would replace the term gas by the term flatulence ++++++++++++++++++++++++++++++++++++++++++++
Both Pakistan and Iran are lying to the people to deflect attention from real problems. Iran reeling under International Sanctions. Their petroleum exports have fallen below 70%. Iranian currency has lost 70 to 80% of it value. They don’t have $ to import medicine for their people. No foreign exchange reserves.
If Iran doesn’t bellicose stance, it is not going to get only worse.
Where is the money coming from? Outer space?
Main point will be how seriously Pakistani ruling elite takes the project. What ever Iran could offer has done it. All around the globe now effort will be made to keep the Pakistan deprived of the blessings of the gas as the IP arrangement does not fit in to greater game of big economic powers of the world. Here will then be the true litmus test of Pakistani leadership. If the leadership ensures that what so ever pressure may be it is ready to go ahead with the proposed project, through a serious and motivational campaign each Pakistani can contribute towards this forthcoming economic project. The economic experts who really love Pakistan can be asked to design some scheme and I can tell you the nation has the potential to come forward to support the Government provided truthfulness and loyalty of cause is ensured by those who are leading the project. Once in the times of President Ayyub such motivational scheme paved the way to raise the required funds.
Pakistan needs the gas to tide over its energy crisis which is and will adversely affect its economy including exports. Though USA is against this protect ( sanction on Iran) but every country should protect their national interest and convince west about importance of contiguous availability of gas . Or let the west / USA help in solving their energy problem urgently. Pakistan can also make use of the sanction on Iran by negotiating the price of gas at a level lower than proposed . Pakistan;s contribution presently stands to 1.5 billion .USD ( which may get escalated over the period ) which has to be arranged from its internal sources. Iran would like to see that your contribution in the project is exhausted first or the project goes ahead with the proposed contribution simultaneously as Iran has some reservations that Pakistan may be constrained ( financial and or political) to back out of the project.
@Its (still) Econonmy Stupid: " One way to raise the funds in the international market will be to show that all the import is intended for export to India."
Even Russia and China backed out of this pipeline due to the threat of sanctions. Pakistan's own banks are wary of lending to the project for the same reason. Why would India agree to geting gas from this route when it has alternate sources for gas import and is also working on bringing down oil imports from Iran? In any case the reason the IPI pipeline became IP pipeline is because India did not agree to the transit terms proposed by Pakistan and was also not being provided necessary guarantees in case of war or other adverse situations with Pakistan (something along the lines of IWT).
Beware of penalties in contract if we donot go ahead under USA pressure. I hope there is no commission involved.
Keep it up Pakistan. Make the pipeline thicker. So that this may be extended in future to India.
if they give money, they will ensure that its their companies which get all contract... further, the day we sign this, we will be eligible for sanctions... so what are we getting? The price of the imported oil will be very high
Its time to walk the talk. Either show me the money or shut up. This is pure business deal with no emotions of national interest or regional politics. It also shows that when push comes to shove there is a trust deficit between the so called friends. One way to raise the funds in the international market will be to show that all the import is intended for export to India. Pakistan will keep a portion of the gas in lieu of transit fee.
That leaves $1 Billion short -- and that assumes the project is completed for the projected cost which is highly unlikely. The concept of raising $1 Billion by charging the customers sound great - except many/most Pakistani's don't pay their utility bills and one of ET's recent articles indicated that gas theft was rampant. Lastly -- assuming the pipeline is built Iran is going to charge you for the gas - how much and where are those funds going to come from?