“After finalising the total arrangement, the petroleum ministry will seek approval from the cabinet in order to move ahead on the financing plan for the IP gas pipeline project,” sources said.
According to sources, Adviser to Prime Minister on Petroleum and Natural Resources Dr Asim Hussain will lead the Pakistan team. Mubeen Sulat, managing director of Inter State Gas Systems, will also be part of the delegation.
During Iranian President Mahmoud Ahmadinejad’s visit to Pakistan for the Developing-8 Summit, an Iranian team had also visited the country to finalise the draft of the Inter-Governmental Cooperation Agreement on Engineering Procurement Construction (EPC) works.
The Pakistani side was informed during the visit that $250 million in financing for the IP project, on a government-to-government basis, was confirmed; whereas the Iranian government is moving to settle some issues with Iranian commercial banks to provide another $250 million. “During the upcoming visit of the Pakistani team, the arrangement of the total $500 million will be finalised after issues with Iranian commercial banks are settled,” sources added.
Pakistan will avail this financing to lay its portion of the gas pipeline. Iranian companies will carry out the construction in a joint venture with Pakistan’s gas utilities: Sui Northern Gas Pipelines and the Sui Southern Gas Company.
In addition to Iranian financing, sources said that Pakistan will also avail a buyer’s credit facility to make payments for the import of material needed to build the gas pipeline. The Government of Pakistan will raise the funds needed for the pipeline through the Gas Infrastructure Development Cess, a kind of tax being charged from domestic gas consumers. The government expects to receive Rs30 billion from gas consumers on this account in the current financial year.
Pakistan is currently facing pressure in securing sufficient funding for the project from foreign countries and financial entities due to sanctions imposed against Iran because of its nuclear programme.
Under the IP gas import project, Pakistan will import 750 million cubic feet of gas per day (mmcfd). That quantity is extendable to one billion cubic feet of gas per day. The Government of Balochistan wants 250mmcfd for use at the Gwadar Port, and the Pakistani government is expected to avail the import facility up to the maximum allowed to meet Balochistan’s requirements.
German-based firm ILF has already completed a detailed engineering design of the project. According to the interim feasibility report, the cost of the project will be in the range of $1.2-1.5 billion.
Published in The Express Tribune, November 30th, 2012.
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Islamic Republic Of Iran has lots of cash money to invest why not in Islamic Pakistan very great news for Gas Hungary Pakistanis! zionists or usa has nothing to do in our business with our Great Islamic neighbor Iran europe england usa canada are no more master of the economic world Pakistan govt must stand strong a great oportunity for our reagon Pakistan is loosing industriel base Russia Ir Iran are welcome central asian countries are looking towards Pakistan!
We hope that the project is implemented unlike futile lip-service of Dictator Musharraf era!
Be nice if some reporter wrote an article which discussed the IP in depth - outlining the pro's/con's - cost/benefit - and whether the IP actually solves or creates more problems. To my knowledge Pakistan gas shortage is 2 Billion cfd and if that is correct your going to face sanctions by both the USA and EU (your largest export market), likely loose IMF support and still end up with a massive energy shortage.