Tehran has expressed concern over delay in start of work on the Iran-Pakistan gas pipeline and has pressed Islamabad to swiftly nominate entities for going ahead with the project.
According to sources, Iranian Deputy Minister of Petroleum in International and Commercial Affairs A Khaledi, in a letter on May 27, reminded Pakistan government that after a government-to-government cooperation agreement between the two countries, they were supposed to select entities to commence work on the gas pipeline immediately.
“Iran has already done this, but it is still waiting for any action from Pakistan side. Since time is too short, your prompt instruction in this regard is highly appreciated,” the Iranian minister said.
Sources say a Pakistan team was also scheduled to visit Iran on June 3 to finalise the award of contract to Iranian firm Tadbir Energy that will lay Pakistan’s part of the pipeline, but it put off the trip because of transition of power to a new government after general elections.
Tadbir will act as the lead contractor along with nominated local sub-contractor(s).
Following the agreement between the two sides in the second week of March, Pakistan has failed to pick a sub-contractor for laying the pipeline, which will bring Iranian gas. This has hampered the process of finalising the engineering, procurement and construction (EPC) contract between Interstate Gas Systems and Tadbir Energy and a contract between the EPC contractor and sub-contractor.
Sources say the delay is a matter of worry for Iran that has made no secret of its concerns in previous meetings and drawn immediate attention of Pakistan authorities.
The cabinet has already waived Public Procurement Regulatory Authority (PPRA) rules for the award of contract directly to Tadbir Energy.
Pakistan accepted Iran’s offer to finance and construct the gas pipeline after Russia and China backed out of the project in the face of US pressure.
Iran designated Tadbir Energy to start off work on the project and was also extending a $500 million loan.
Tadbir faces no international sanctions and is controlled by the Imam Khomeini Relief Foundation, one of Iran’s largest charitable groups. It will undertake all engineering, procurement and construction activities in the first phase of the pipeline, which will start from the border and cost around $250 million.
In the second phase, Iran will increase financing by $250 million, but it will hinge on discussions about Tadbir’s involvement in distribution of gas in Pakistan.
Total cost of the pipeline is expected to reach around $1.35 billion. Iran will cough up $500 million whereas the remaining is planned to be generated through the gas infrastructure development cess. The new government will take a decision on the cess, the collection of which has been suspended by the court.
With the US slapping Tehran with a raft of sanctions that have hurt Iranian companies’ ability to do business and created hurdles in making payments to them, Pakistan and Iran drew up a plan to finance the pipeline without the former transferring any funds to the latter.
“Pakistan will not pay Tadbir, instead, the Iranian government will give $500 million to the firm for the construction of the pipeline,” a source said.
The project envisages supply of 750 million cubic feet per day of gas to Pakistan beginning at the end of December 2014 and the fuel 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, interim front-end engineering design and route reconnaissance survey.
Published in The Express Tribune, June 11th, 2013.
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