Gas pipeline project: Pakistan, Iran sign $500m initial agreement for IP

Pipeline contract to be awarded to Iranian company.

Iran and Pakistan have agreed to adjust a $500 million loan with the price of gas to fund the construction of Pakistan’s portion of the Iran-Pakistan (IP) gas pipeline. The move is likely to increase the price of gas from Iran.

“Pakistan and Iran have signed an initial deal of $500 million for financing of the IP gas pipeline project. This amount would be adjusted in gas price,” Adviser to Prime Minister on Petroleum and Natural Resources Dr Asim Hussain said, while addressing a press conference here on Tuesday.

While the initial signing of the deal was made during Hussain’s recent visit to Iran, the final deal will be inked after approval from the Cabinet. Hussain said that the contract of laying the pipeline would also be awarded to an Iranian company.



“The Iranian side would adjust the loan amount in gas price; therefore, it will not be a burden on the government,” Hussain said, adding that the government has collected some money on account of the Gas Infrastructure Development Cess (GIDC) to fund the construction of Pakistan’s portion of the pipeline.

He also said that work was in progress on the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline project, which was fully supported by the US.

Unveiling a new CNG policy, Hussain said that Compressed Natural Gas (CNG) would be gradually phased out through different measures. “We will impose another tax to bring the CNG price from 72% to 80% parity of petrol to discourage its use,” he said, adding that a policy was being prepared to impose a ban on CNG in cars over 1,000 CC.

He said that the CNG sector was using 425 million cubic feet of gas per day (mmcfd) which needed to be restricted. He said that CNG stations built on a good business model were still operating and making profits, while CNG stations based on a poor business model are shut down and CNG stations owners are fighting to raise their profit.



“The transport sector should be subsidised to provide relief to consumers and provinces should bear it,” he said, adding that policy guidelines should be submitted to the Supreme Court in this regard. “We are moving a summary to the Economic Coordination Committee (ECC) for approval of policy guidelines for the CNG sector,” he said.

Responding to a question about the uniform rate of GIDC, he said it had been imposed on CNG to bring its price close to petrol. “We will also raise the rate of gas price for the textile industry,” he added.

The adviser claimed that the subcommittee of the National Assembly was working for its personal gains and it had done nothing to safeguard national interest.

Meanwhile, speaking at the inaugural session of the Annual Technical Conference (ATC) 2012, Hussain said that the past governments had neglected the oil and gas upstream industry.

“We have created a policy that provides incentives to oil and gas exploration companies which would help enhance exploration activities,” he said. “The country will also be in a position to import LNG next year to overcome the energy crisis,” he added.

Published in The Express Tribune, December 5^th, 2012.