IP gas pipeline project: Iran firm wins contract to build Pak portion of pipeline

Published: February 28, 2013
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Presidents Mahmoud Ahmadinejad, Asif Ali Zardari and Iran’s Supreme Leader Ayatollah Ali Khamenei at a meeting in Tehran. PHOTO: AFP

Presidents Mahmoud Ahmadinejad, Asif Ali Zardari and Iran’s Supreme Leader Ayatollah Ali Khamenei at a meeting in Tehran. PHOTO: AFP

ISLAMABAD: 

In an apparent snub to mounting US pressure, Pakistan has awarded the contract of building its portion of the multibillion-dollar Iran-Pakistan gas pipeline to an Iranian firm.

This comes as President Asif Ali Zardari met with his Iranian counterpart Mahmoud Ahmadinejad and supreme leader Ayatollah Ali Khamenei in Tehran on Wednesday.

Iranian firm Tadbir Energy has been awarded the contract to construct Pakistan’s portion of the gas pipeline, sources told The Express Tribune. The initialisation of the contract took place during a recent visit of a Pakistani delegation to Tehran. The pipeline construction will be formally launched on March 4 on the Pak-Iran border.

The Pakistan cabinet has already approved a waiver of the Public Procurement Regulatory Authority rules in order to award the contract directly to Tadbir Energy.

“After Russia and China backed out due to US pressure, Pakistan decided to avail Iran’s offer for financing and constructing Pakistan’s portion of the pipeline,” a senior government official said.

Sources added Pakistani public sector firm Interstate Gas Systems (ISGS) and Tadbir Energy initially signed the contract in Tehran, and now the ISGS board will endorse it. Iran designated Tadbir Energy to work on the project for which Tehran is also extending a $500 million loan.

The firm faces no sanctions from any foreign government. It is controlled by the Imam Khomeini Relief Foundation, one of Iran’s largest charitable groups.

The neighbours had already signed an inter-governmental cooperation agreement and the firm has now formally been awarded the contract. Sources added that Tadbir Energy would undertake all engineering, procurement and construction for the first instalment starting from the border at a cost of around $250 million.

Tadbir Energy will also undertake the second phase of the project, and will increase the financing by allocating a further $250 million to the pipeline project, subject to discussions regarding its involvement in the distribution of gas in Pakistan later on.

It has also agreed to provide and assist in arranging $250 million as supplier credit and any additional financing for the second phase. The firm will act as the lead contractor along with the nominated local subcontractor(s).

The total cost of the project is expected to be around $1.5 billion. Tehran will cough up $500 million, while the remaining $1 billion will be generated through the Gas Infrastructure Development Cess (GIDC).

With Washington slapping Tehran with a raft of sanctions that have hurt Iranian companies’ ability to do business and creating hurdles in making payments to them, Islamabad and Tehran have drawn up a plan to finance the pipeline on Pakistan’s side without the former transferring funds to the latter.

“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 said.

The project envisages gas inflows of 750 million cubic feet per day by the end of December 2014, which will be consumed by power plants to generate around 4,000 megawatts of electricity.

The project’s engineering and management consultant, who was appointed in April 2011, has completed work on a bankable feasibility study, an interim front-end engineering design, and a route reconnaissance survey.

Project must go ahead: Khamenei

In Tehran, supreme leader Ayatollah Ali Khamenei told President Zardari that the gas pipeline project must go ahead despite US opposition.

“The Iran-Pakistan gas pipeline is an important example of Tehran-Islamabad cooperation, and despite hostilities towards the expansion of ties we must overcome this opposition decisively,” Khamenei told Zardari, his office reported.

“Accessing safe energy source is the first priority for any country including Pakistan. In this region, the Islamic republic is the only nation that has safe energy resources and we are ready to provide Pakistan its energy needs,” Khamenei said.

President Ahmadinejad told Zardari that, “building the gas pipeline between Iran and Pakistan is a great and important event, and it serves the two nations’ interests,” the president’s office reported.

“I believe that building this project is very beneficial for both sides and we support all the work carried out so far,” Zardari said in talks his Iranian counterpart.

“The international and regional players have tried in vain to prevent an expansion of Iran-Pakistan ties but the people have learnt how to act against enemies of Islam,” he was quoted as saying.

Islamabad has said it will pursue the project regardless of US pressure, saying the gas is needed to help Pakistan overcome its energy crisis that has led to debilitating blackouts and suffocated industry. Iran has almost completed the work on 780-kilometre pipeline in its territory.

“There are impediments in view of the US opposition to the project but we are determined to complete it to meet our fast-growing energy requirements,” said one government official on condition of anonymity.

(With additional input from AFP)

Published in The Express Tribune, February 28th, 2013.

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Reader Comments (24)

  • John
    Feb 28, 2013 - 2:52AM

    Pakistan never can achieve the project go ahead.If they move against US, then surely you can expect lot of retaliation from them in case of aid,military support,security etc very soon.It is suicidal for them to go against US wishes.

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  • amir jafri
    Feb 28, 2013 - 2:59AM

    mashaAllah!…first step towards de-colonization…someday we’ll be free of the westoxication…iran turkey zindabad paindabad

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  • PakPower
    Feb 28, 2013 - 3:21AM

    Great news. I wish we could ensure the safety of the pipeline too. A $500 million pipeline with a hole in it won’t do much good.

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  • CK
    Feb 28, 2013 - 3:37AM

    When ever PPP tries to do something good for the country i smell mischief.

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  • MK
    Feb 28, 2013 - 4:04AM

    Interesting trend. Gwadar port to China against US wishes and now Gas project with Iran. Looks like Policy makers have written off US and looking for new/improved ties around the neighborhood. Lets watch and see.

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  • Maj
    Feb 28, 2013 - 5:03AM

    US is easy to deal with; I worry more about the myriads of Saudi financed radicals

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  • Something Clever
    Feb 28, 2013 - 6:41AM

    @MK:
    They better hope the new ties result in billions of dollars from somewhere as well. But, Iran is unable, China is unwilling and probably both India and Pakistan itself wouldn’t be wanting to enter into that type of relationship anytime soon. Go further and you have… North Korea, Palestine and Egypt and those three being possible options is just a joke.
    It also results in Pakistan not being able to make good on any monetary deals that are made with those new neighborhood relations and if you want to see a relationship like that sour, disasters in the business side of things will do it.
    So, the result is… a loss of aid and being hit with sanctions for relationships whose foundations are based on deals and relations that currently require that aid to function in the long term. Add in sanctions and noting that Pakistan has nothing to exploit like Iran and Saudi Arabia and you have… A country much worse off than it is now.

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  • Daw
    Feb 28, 2013 - 7:30AM

    Pakistan first
    This should be completed before US withdrawal from Afghanistan . More leverage on negotiating table

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  • cautious
    Feb 28, 2013 - 8:32AM

    while the remaining $1 billion will be generated through the Gas Infrastructure Development Cess
    .
    Sounds grand – however if people paid their taxes and utility bills Pakistan would already have the money to buy energy on the open market or build whatever – they don’t so this scheme sounds great but has no substance.

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  • Irtiza
    Feb 28, 2013 - 8:34AM

    @Maj: So true, very soon we will see our foreign minister called to SA do discuss ‘brotherly’ relations of ‘mutual’ interest.

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  • syed baqar ahsan
    Feb 28, 2013 - 8:54AM

    @John:
    with this fear we have lost our 65 years of independence to Americans and that game never ending and now they themselves loosing its own grip so things changing fast,for how long one can take black mailing.American so called champion of democracy sponsored all dictators in Pakistan and instigating all other institutions to blackmails us.USA always played smart games by keeping our system weak and depended.

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  • Pakistani Ostrich
    Feb 28, 2013 - 10:37AM

    “..In an apparent snub to mounting US pressure, Pakistan has awarded the contract of building its portion of the multibillion-dollar Iran-Pakistan gas pipeline to an Iranian firm..”

    What a political and diplomatic snub by the shrew pakistani government! Due to US sanction, no country worth its name (Even ‘all-weather’ friend china) wanted to get involve in this project due to UN sanction and US/Europe/Japanese objection.

    However, pakistani government is so brave that the pakistan ‘awarded’ the contract, entirely funded by the iranian money to iran!! Bravo! What courage! I see US and west getting jealous.

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  • pervaiz memon
    Feb 28, 2013 - 10:37AM

    This is right time for this project . USA can not do anything foolish until their soldier and equipment return back home trough Pakistan route .

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  • Waseem Sarwar
    Feb 28, 2013 - 10:44AM

    Well the big issue isn’t USA, its Saudi-backed PML N and other extremists parties. I doubt if they will continue work on this pipe line with a Shia Iran. interesting times ahead.

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  • pakistani
    Feb 28, 2013 - 10:55AM

    its good for pk i wish we can bring tajikstan afghan pipe line too. and we deliver it to china and india too in exchange of water and religional partnership.
    and we nead institutional shift and change in terrorism mind set to avail peace and economy.
    thanks bold iran plz pipe us courage too againt enemies of pakistan.

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  • Polpot
    Feb 28, 2013 - 11:36AM

    There goes out of the window
    ++++++++++++++++++++++++
    US participation in the Diamer Bhasha Dam.

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  • Sheikh Ali Tariq
    Feb 28, 2013 - 12:14PM

    Look at South America as along as the US was involved there they never prospered. For their own sake and ours the US should along with NATO forces leave Afghanistan and Pakistan. That way we can have peace and prosperity.

    As long as the US is meddling in our affairs we will never learn to stand on our own feet. Let Pakistan learn how to live in a neighborhood on her own.

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  • ikash
    Feb 28, 2013 - 1:47PM

    Tremendous courage….it is now pak has achieved independence…..in ikashmir pti is favorite but it will b unfair,,,,ppp has also done some most important work in the history of pakistan.Recommend

  • Good Human
    Feb 28, 2013 - 4:29PM

    we need lots of gas to run our industry & economy by this we can make our country free of bad people….

    we need gas either Pakistan has to go to north pole or even mars….

    Recommend

  • Babur Sohail
    Mar 1, 2013 - 11:34AM

    @John: If the US wish to stop this project comes true, will this be a GREAT service to the people of Pakistan, Who are already suffering from severe energy crises.
    But I think US will find out so many excuses to assent their agenda.
    After all they are the human rights champions and providing Pakistani people the basic necessities like gas and elec is inhuman.

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  • Tofeez
    Mar 5, 2013 - 8:51PM

    Few days back the democratic government has made progressive moves in different sectors of life. Pakistan has converted its ties into a strategic partnership with Qatar, different agreements have been signed on importing liquefied gas, an agreement between the interior ministers of both the governments has been established, agreement in the legal domain has taken place, MOUs between the ministries of energy, trade as well as industries have prospered. Prime Minister Gilani’s visit has opened new vistas of cooperation and similarly President Zardari has pledged early completion of the Pak-Iran gas pipeline project despite US pressure. For national development and progress we need to have trade and financial agreements with our neighboring countries. To overcome the crisis of energy, despite searching for new reserves, we desperately need to have such agreements. The Pakistani leadership is fully committed to regional development as well as economic cooperation. These developments show that the government is making efforts for the continuity of the democratic process as well as its belief in consultations, reconciliation, tolerance and the protection of national integrity to solve the political, social and economic crisis. Though the government has to face a lot of challenges including the war on terror, energy crisis, political instability, etc, it is still showing commitment to resolve these issues. The government should be appreciated for these initiatives instead of criticizing and must be respected and should be given a chance to complete its tenure for democracy to flourish.

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  • Farooq
    Mar 13, 2013 - 9:32PM

    The ‘peace pipeline’, so named to denote the benefits of the gas project for Iran, Pakistan and the region, has finally seen a beginning on the Pakistan side. This pipeline, as stated by President Asif Ali Zardari and his Iranian counterpart Mahmoud Ahmadinejad at the ground breaking ceremony at Gabd near the Iran-Pakistan border is indispensible to eradicate Pakistan’s energy deficit. Though India, one of the original three partners of the pipeline, has backed out of the project to gain other benefits from the US (the nuclear power cooperation agreement), the pipeline still holds promises benefits for the remaining two partners, Pakistan and Iran, with China a potential third in times to come. Pakistan has been in dire need of expanding its energy resources. Entire credit of this agreement goes to Pakistan Peoples Party and President Asif Ali Zardari who brushed aside US pressure and preferred country’s interests. This project is a mile stone in the history of PPP and a landmark Achievement of Pakistan Peoples Party. Hats off to President Asif Ali Zardari.

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  • Sadia
    Mar 14, 2013 - 8:09PM

    The future of Pakistan largely depends on its ability to revitalize its economy. Dampened by innumerable burdens, the major being terrorism, the country could slide into irretrievable danger if the people of the country are not given the necessary means to live a decent life. Since 1994, the project has suffered innumerable delays on a number of occasions. Finance proved difficult to raise. Now that Iran and Pakistan along with China have agreed to push the project ahead, it should not become a victim of the controversy over Iran’s nuclear programme, particularly, as is hoped, that problem can yield a solution through international diplomacy. PPP Govt has win all the credit by signing this deal with Iran despite severe US pressure. Give credit where it is due….

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