Iran has designated a ‘clean’ private company, which has not been placed under US sanctions, to take a direct contract for laying a pipeline in Pakistan under the Iran-Pakistan gas supply project for which Tehran is extending a $500 million loan.
The two countries have already signed an initial agreement on the loan, but the accord is yet to be finalised. In the first phase, Iran will lend $250 million and extend the assistance later to $500 million.
The move suggests that the postponement of President Asif Ali Zardari’s trip to Iran at the eleventh hour last month, apparently in response to US pressure, has not stalled progress, albeit slow, on the project.
An Iranian team, which visited Pakistan last week, discussed the award of the pipeline construction contract to its private firm, Tadbir Energy. Gaspor Iranian, which faces no sanctions from any foreign government is controlled by the Imam Khomeini Foundation, one of Iran’s largest charitable groups.
As hurdles stand in the way of making payments to Iranian firms due to US and EU sanctions, the two sides have drawn up a plan to finance the gas pipeline on Pakistan’s side without the need of Islamabad transferring funds to Tehran.
Sources told The Express Tribune that the board of directors of Inter-State Gas Systems Limited (ISGS) in a meeting held on Wednesday was told that Iran had designated a private firm for the pipeline construction contract against the loan of $500 million. ISGS, established in 1996, works on gas import projects.
According to sources, the proposal will be tabled before the Economic Coordination Committee (ECC) of the cabinet for approval. The contract will be given to the private firm on government-to-government basis and a request will be made to waive Public Procurement Regulatory Authority (PPRA) rules in the award of contract without bidding.
“Pakistan will not pay any money to the company, instead the Iranian government will pay $500 million directly to the firm for the construction of the pipeline,” a source elaborated.
Earlier, President Zardari was scheduled to visit Iran on December 7, 2012 to seal the fate of the gas pipeline, critical to meet Pakistan’s pressing energy needs and ease shortages. However, he skipped the trip at the last moment and went to Britain, which different quarters believed was the result of US pressure.
This theory was supported by the US announcement of $200 million assistance for Diamer Bhasha Dam and release of $688 million under the Coalition Support Fund (CSF) after the postponement of the trip.
Despite all this, “recent developments indicate that the two countries are pushing ahead with the project, ignoring US pressure,” a source said.
Last year, Tadbir Energy sought to take over a French refinery, which experts called a legal move as the company faced no sanctions. However, they cautioned that the firm would be subject to tighter controls and might be barred from purchasing equipment.
“Now, the problem of funds transfer to an Iranian firm has been resolved, but the firm may face restrictions in the purchase of equipment for the pipeline,” an official said.
The project envisages gas flow of 750 million cubic feet per day (mmcfd) by the end of December 2014, which will be consumed in power plants to generate around 4,000 megawatts of electricity.
The engineering and project management consultant, who was appointed in April 2011, has completed work on bankable feasibility study, interim front-end engineering design and route reconnaissance survey.
The consultant has also submitted final reports on the detailed route survey and final front-end engineering design, which is under review.
Published in The Express Tribune, January 10th, 2013.
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