Building the IP pipeline: Finance ministry gives last minute approval to ‘terms’
Tadbir Energy cannot start constructing pipeline until contract is okayed.
The formal launch of the project remained just a show, and no concrete agreement was signed that day. PHOTO: FILE
ISLAMABAD:
The Ministry of Finance’s dillydallying was the reason that the contract for building Pakistan’s portion of the Iran-Pakistan (IP) Gas Pipeline had still not been awarded to an Iranian firm designated for the task at the time of the formal launch of the project on March 11, The Express Tribune has learnt.
“It has been left to the next government to award the construction contract to the Iranian firm, as the outgoing government failed to award it at the time of the inauguration due to the failure of the finance ministry in issuing sovereign guarantees in a timely manner,” a senior government official told The Express Tribune.
The Government of Pakistan looked set to award the construction contract of the IP project to Iranian firm Tadbir Energy at the time the project was formally inaugurated by President Asif Ali Zardari and Iranian President Mahmoud Ahmedinejad. However, the formal launch remained just a show, and no concrete agreement was signed that day.
When contacted, Finance Minister Salim Mandviwalla said that the finance ministry had approved the term sheet of the contract provided by the Iranian firm and okayed the relevant government guarantees. The ministry was supposed to issue sovereign guarantees to Tadbir Energy for the contract and provision of financing, which forms one of the preconditions for the Engineering Procurement and Construction (EPC) contract. The approval of the issuance of sovereign guarantees had already been given by a cabinet committee. However, documents reveal that the term sheet and the issuance of government guarantees had not been approved by the finance ministry till March 14, and were approved only on March 15, the last day in power of the outgoing government.
“The finance ministry has now approved the term sheet and sovereign guarantees, paving the way for awarding the contract to the Iranian firm to launch construction work,” an official added.
A Pakistani delegation is leaving for Tehran again on Saturday (today) to finalise the contract with the Iranian firm. A final round of negotiations is planned to be held with Tadbir Energy on March 16 (today) and 17 (Sunday), and the issuance of sovereign guarantees is to be held on record, without which the Government of Pakistan will not be able to finalise the EPC contract with the Iranian firm.
The Government of Pakistan has already initialled the award of contract to Tadbir Energy, but a final agreement has yet to be signed. Furthermore, the cabinet has also Okayed a waiver of the Public Procurement Regulatory Authority rules in order to award the contract directly to the Iranian firm.
“After Russia and China backed out of the project 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.
Pakistani public-sector firm Interstate Gas Systems (ISGS) and Iranian firm Tadbir Energy undertook the initial signing of the contract in Tehran, and the ISGS board later endorsed it. Iran has designated Tadbir to carry out the project, for which Tehran is also extending a $500 million loan. Tadbir Energy faces no sanctions from any foreign government, and is controlled by the Imam Khomeini Foundation, one of Iran’s largest charitable groups.
Tadbir will undertake all engineering procurement construction work for the first segment starting from the Iran-Pakistan border for around $250 million.
Tadbir will also undertake the second segment of the project, and will increase the financing facility by allocating another $250 million to the 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 segment. The Iranian firm will act as the lead contractor along with the nominated local subcontractor(s).
Published in The Express Tribune, March 16th, 2013.
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Correction: In an earlier version of the article, the word "contract" was misspelled as "construct" in the second paragraph. The error has been rectified.
The Ministry of Finance’s dillydallying was the reason that the contract for building Pakistan’s portion of the Iran-Pakistan (IP) Gas Pipeline had still not been awarded to an Iranian firm designated for the task at the time of the formal launch of the project on March 11, The Express Tribune has learnt.
“It has been left to the next government to award the construction contract to the Iranian firm, as the outgoing government failed to award it at the time of the inauguration due to the failure of the finance ministry in issuing sovereign guarantees in a timely manner,” a senior government official told The Express Tribune.
The Government of Pakistan looked set to award the construction contract of the IP project to Iranian firm Tadbir Energy at the time the project was formally inaugurated by President Asif Ali Zardari and Iranian President Mahmoud Ahmedinejad. However, the formal launch remained just a show, and no concrete agreement was signed that day.
When contacted, Finance Minister Salim Mandviwalla said that the finance ministry had approved the term sheet of the contract provided by the Iranian firm and okayed the relevant government guarantees. The ministry was supposed to issue sovereign guarantees to Tadbir Energy for the contract and provision of financing, which forms one of the preconditions for the Engineering Procurement and Construction (EPC) contract. The approval of the issuance of sovereign guarantees had already been given by a cabinet committee. However, documents reveal that the term sheet and the issuance of government guarantees had not been approved by the finance ministry till March 14, and were approved only on March 15, the last day in power of the outgoing government.
“The finance ministry has now approved the term sheet and sovereign guarantees, paving the way for awarding the contract to the Iranian firm to launch construction work,” an official added.
A Pakistani delegation is leaving for Tehran again on Saturday (today) to finalise the contract with the Iranian firm. A final round of negotiations is planned to be held with Tadbir Energy on March 16 (today) and 17 (Sunday), and the issuance of sovereign guarantees is to be held on record, without which the Government of Pakistan will not be able to finalise the EPC contract with the Iranian firm.
The Government of Pakistan has already initialled the award of contract to Tadbir Energy, but a final agreement has yet to be signed. Furthermore, the cabinet has also Okayed a waiver of the Public Procurement Regulatory Authority rules in order to award the contract directly to the Iranian firm.
“After Russia and China backed out of the project 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.
Pakistani public-sector firm Interstate Gas Systems (ISGS) and Iranian firm Tadbir Energy undertook the initial signing of the contract in Tehran, and the ISGS board later endorsed it. Iran has designated Tadbir to carry out the project, for which Tehran is also extending a $500 million loan. Tadbir Energy faces no sanctions from any foreign government, and is controlled by the Imam Khomeini Foundation, one of Iran’s largest charitable groups.
Tadbir will undertake all engineering procurement construction work for the first segment starting from the Iran-Pakistan border for around $250 million.
Tadbir will also undertake the second segment of the project, and will increase the financing facility by allocating another $250 million to the 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 segment. The Iranian firm will act as the lead contractor along with the nominated local subcontractor(s).
Published in The Express Tribune, March 16th, 2013.
Like Business on Facebook to stay informed and join in the conversation.
Correction: In an earlier version of the article, the word "contract" was misspelled as "construct" in the second paragraph. The error has been rectified.