Gas pipeline: Pakistan wants Iran to finance project in full

Published: August 3, 2013
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“we will discuss the project with the new Iranian cabinet for seeking the entire financing,” says Petroleum minister. PHOTO: AFP

“we will discuss the project with the new Iranian cabinet for seeking the entire financing,” says Petroleum minister. PHOTO: AFP

ISLAMABAD: 

As the government is aware that US sanctions may hamper financing for the Iran-Pakistan gas pipeline project, it has decided to place a request before the new Iranian government for completely financing the vital energy project.

Iran had committed to the previous PPP-led government a loan of $500 million for laying the pipeline in Pakistan, which would cost more than $1 billion. The two governments also agreed to award construction contract to Iranian firm Tadbir Energy. However, the contract could not be signed in the absence of sovereign guarantees by Pakistan.

Speaking to the media here on Friday, Petroleum Minister Shahid Khaqan Abbasi stressed that the government would continue work on the IP gas pipeline and “we will discuss the project with the new Iranian cabinet for seeking the entire financing.”

Iran was facing sanctions and the Foreign Office had been asked to assess the impact of US curbs on the project, he said. Turkey and Armenia are already getting supplies from Iran.

LNG terminal

Talking about liquefied natural gas (LNG) import from Qatar, Abbasi said Qatari government had asked Pakistan to build an LNG terminal before going for a gas supply deal. So far, no agreement had been signed for LNG import from Qatar, he clarified.

“I visited Qatar along with Punjab chief minister, but the Qatari energy minister asked us to give a commitment that LNG terminal will be built first,” he said.

Many countries have set up terminals first and then signed the gas supply deal. “We will follow this model,” Abbasi said.

The consultant for LNG import has proposed that Pakistan bring the Asian Development Bank (ADB) on board for guarantees in an effort to avoid providing government guarantees.

“We want LNG suppliers to accept guarantees provided by gas companies rather than government guarantees,” he said and declared that Pakistan would not import LNG from Qatar if the price was not feasible.

He made it clear that the government would not explore the option of striking a state-to-state deal for LNG import from Qatar and said Doha had varying gas price agreements with different countries.

Earlier, it provided LNG at $2 to $3 per million British thermal units (mmbtu) to Japan, which has now signed a deal at $16 to $17 per mmbtu. Similarly, India had struck an initial deal at $3 per mmbtu, but now it reached an agreement at $19 per mmbtu.

India has also expressed interest in exporting LNG to Pakistan but has demanded a higher price, which Abbasi said was not acceptable. “We have asked India to revise the price.”

According to the minister, bids will be invited for import of 200 million cubic feet per day of LNG on fast track through a terminal along with a jetty. In this programme, five parties are interested who claim that they will be able to bring LNG in six to eight months.

He expected the government to sign a 10-year contract with the successful bidder and tolling charges would be paid to the terminal owner. “LNG imports will start in mid-October under this project,” he expressed the hope.

In the second option, Sui Southern Gas Company (SSGC) had invited bids for starting work on a retrofit project for LNG import. In this programme, SSGC will convert Progas LPG terminal into an LNG handing facility. Technical bids had been opened, but financial bids were not.

“We have asked SSGC board of directors to examine the financial bids. The government will push ahead with this project if it is technically and financially feasible,” he said.

4Gas Asia has qualified for it and, according to Abbasi, PPRA rules also allowed the award of contract to a single supplier.

Apart from this, two offshore projects of 500 mmcfd each were under consideration, which could be at Port Bin Qasim or Gwadar Port. “We can save $500 to $700 million per annum if we change fuel (from oil to gas),” he added.

Published in The Express Tribune, August 3rd, 2013.

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Reader Comments (32)

  • Alann
    Aug 3, 2013 - 2:59AM

    America spending billions of dollars every year, Iran helping with pipeline, Russia helping with steel mills, Saudis & Chinese helping with telecom, Chinese helping with nuclear plants, Chinese helping with Port development, Chinese selling basically almost everything in Pakistani market. Even the terrorists are not being lazy and are dutifully carrying out their suicide bombings!
    What is Pakistan doing? Condemning everything happening around the world and accusing India, US, Israel. (And dumping all of the public’s wealth in nukes and Swiss/US bank accounts and big plots all across Pakistan – but you can’t know that, its a top secret!)

    Recommend

  • np
    Aug 3, 2013 - 3:13AM

    Yep Iran can pay for the pipeline and then it can pay for the gas. Pakistan’s contribution to the project is that it is courageously willing to accept free gas despite the sanctions.

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  • np
    Aug 3, 2013 - 3:16AM

    ““We want LNG suppliers to accept guarantees provided by gas companies rather than government guarantees,””

    COnsidering the number of times PSO had a technical default which foreign supplier will agree to do that?

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  • Bravo
    Aug 3, 2013 - 3:39AM

    Iran’s economy is choking because of sanctions so it has no choice but to finance this pipeline for future income. This is probably the only way America will also accept this pipeline

    Brilliant move by Nawaz!

    Recommend

  • Waqas
    Aug 3, 2013 - 3:41AM

    Yeah first step to stop this project, i am 99% sure Mr. Sharif with his saudi love affair will not let this project go through.

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  • akhtar tak
    Aug 3, 2013 - 3:53AM

    Good advicemfrom mr kerry

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  • Naresh
    Aug 3, 2013 - 4:26AM

    From the Article :
    .
    According to the minister, bids will be invited for import of 200 million cubic feet per day of LNG on fast track through a terminal along with a jetty.
    .
    200 Million Cubic Feet of LNG = 120,000 Million Cu Ft of NG = 120 Billion Cu Ft NG
    .
    This Equates to 2.52 Million Tonnes of LNG Per Day!
    .
    As such I would opine that the Figure is 200 Million Cubic Feet of Natural Gas per Day.
    .
    Cheers

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  • Sonya
    Aug 3, 2013 - 4:27AM

    It looks like Pakistan does not mean business – a suggestion to Iran – don’t waste time on Pakistan and let them live in darkness especially when they have controversial PML N government.

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  • A Pakistani
    Aug 3, 2013 - 5:06AM

    It will be a real test of friendship of Iranian Government, I.e., whether it is willing to help energy-hungry Pakistan or this pipeline is just a show-off just like various other shallow promises of PPP?
    In the later case, the credibility of brotherly Iran will be at stake just like the PPP had lost all credibility during the last few months of its government.

    Recommend

  • Saqib
    Aug 3, 2013 - 5:29AM

    waste of time and money. I suggest Pakistan govt should cancel this project in protest to Iran’s interference in Syria and killings of Syrian by their revolutionary guards. Govt should focus on TAPI rather.

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  • Hari Om
    Aug 3, 2013 - 6:32AM

    Let me guess that Pakistan’s next demand is that Iran must also pay Pakistan to consume the gas Iran supplies to Pakistan .

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  • Surprise
    Aug 3, 2013 - 7:52AM

    PML-N is serving US and Saudi intersts, not the Pakistani. It tell all about how this party secured unexpected victory.Recommend

  • Polpot
    Aug 3, 2013 - 8:37AM

    If the shoe fits ask for another color
    +++++++++++++++++++++++++
    “Gas pipeline: Pakistan wants Iran to finance project in full”
    If the Iranians agree ask that the loan be replaced by an outright grant.

    Recommend

  • ;-)chief
    Aug 3, 2013 - 8:38AM

    100% funding for construction of gas pipeline……
    Simple means we can’t step further without the concent of our Masters……….??????

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  • Np
    Aug 3, 2013 - 9:11AM

    @A Pakistani:
    Huh? Pakistan refuses to pay its part of the pipeline cost which was agreed upon and that puts Iran’s credibility at stake? Strange logic.

    Recommend

  • Ruby
    Aug 3, 2013 - 9:32AM

    If they cannot finance a pipeline because of sanctions, how can they import gas in future?

    Recommend

  • JK
    Aug 3, 2013 - 10:41AM

    The worst thing about PmlN is they make punjab centered policies, not considering Pakistan in general,which has already divided provinces for decades.The obvious example is punjab CM accompanying every minister at every possible level.
    Secondly why are we not moving our resources towards development of hydel generation which is green and cheaper electricity solution.Again if we are buying LNG and Gas from foreign countries will give rise to debts in coming future and keep on choking the economy for ages to come,We still did not learn from the failures of ppp government. Government need to balance out the equation and going all out for thermal energy is not the solution.

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  • Aug 3, 2013 - 11:19AM

    Pakistan is becoming like Dubai. Outsiders come and work in Pakistan, they build ports and nuclear plants (Chinese), gas pipelines (Iran), etc., while the locals relax..

    An innovative way to fight un-employement.

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  • Aug 3, 2013 - 1:30PM

    @Alann: You cannot be more precise than what you have commented in entirety. It shames me to see the condition of the country after sixty-five years.
    The existence of IP Pipeline in our territory is a forgone conclusion. PM Nawaz asking Iran to build it is another ploy in the game that is being seduced by Saudia and the USA.
    This refrain from independent thought and action is costing and will cost Pakistan dearly. Salams

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  • Butt
    Aug 3, 2013 - 2:59PM

    Spending billions of dollars on nukes is not a problem but no money for light and gas. The people are comforable with it then why complain.

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  • Polpot
    Aug 3, 2013 - 4:37PM

    Not only should Iran finance 100 % of the Pipeline if the gas flow does not start by Dec 2014 Iran must pay a penalty of USD 8 Mn per day.
    +++++++++++++++++++++++++++++++++++++++
    Thats only fair.

    Recommend

  • Salman
    Aug 3, 2013 - 6:40PM

    @A Pakistani:
    Sorry I know Pakistanis are good for nothing and they are free loaders. It is very likely that Pakistanis asked for a kick back and Iranians refused. So now they don’t want to pay. Advice to Iran don’t trust Pakistan as it never had a good track record. Pakistanis may not like us but this is a truth

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  • unbelievable
    Aug 3, 2013 - 6:42PM

    Anyone surprised? Pakistan fully understood the problems with sanctions when it made the chest thumping statements and signed agreements with Iran – using “sanctions” as as excuse for not honoring it’s commitments is pathetic, unethical and one more reason why nobody trust Pakistan.

    Recommend

  • Raj - USA
    Aug 3, 2013 - 7:11PM

    Do the readers recall what I wrote months ago about the master sending his servant to buy coconuts and teaching him how to bargain? Is it not happening exactly the same way?

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  • Aug 3, 2013 - 7:27PM

    Knowing pretty well the Iran’s isolation and Pakistan’s blackmailing culture, India has withdrawn from IPI Gas pipeline project. Why our deep sea and mountain high friend China is not extending loan for this project while $500 million is nothing for them.

    Recommend

  • indi
    Aug 3, 2013 - 8:29PM

    naya pakistan :)Recommend

  • Naresh
    Aug 3, 2013 - 8:30PM

    @A Pakistani:
    .
    It will be a real test of friendship of Iranian Government, I.e., whether it is willing to help energy-hungry Pakistan or this pipeline is just a show-off just like various other shallow promises of PPP?
    In the later case, the credibility of brotherly Iran will be at stake just like the PPP had lost all credibility during the last few months of its government

    .
    Iran pays for the Pipeline in its own Territory. Pakistan must pay for the Pipeline in Pakistani Territory.
    .
    If Pakistan does not pay for the Pipeline in its own Territory then Pakistan will have defaulted in its obligation to build the Pipeline in its own Territory.
    .
    The reason for Pakistan asking Iran to build the Pipeline in Pakistani Territory is patent and for all to see i.e. Pakistan does not have money to build its part of the Pipeline.
    .
    This would make Iran very weary of Pakistan’s ability to pay for the Gas it receives from Iran.
    .
    Cheers

    Recommend

  • B
    Aug 3, 2013 - 8:31PM

    There is also a clause in the IP agreement that if Pakistan fails to build the pipeline by ending of this year, they will have to pay a hefty penalty.

    Recommend

  • A Pakistani
    Aug 4, 2013 - 6:00AM

    @ Naresh
    Everyone in Pakistan knows the fact that the previous governments in Pakistan were not serious in the IP pipeline when former dictator Musharraf wasted 7 years and then his NRO-beneficiary the PPP government did nothing in its 5 years tenure except for making headlines by signing the Agreement during the last few days of its tenure, without even making any budgetary allocation.
    Many economists had challenged this act of the otherwise corrupt & incompetent government of PPP http://www.thenews.com.pk/Todays-News-9-164477-Pipedream
    Many analysts in Pakistan had considered this agreement as an election stunt of PPP.
    While the cost of the project has escalated during the last decade (cost overrun), the price per unit has also gone up to the unsustainable level of US$ 13 mmbtu.
    This price could be feasible for Pakistan only when Iran covers the construction cost of US$ 1.3 Billion and there is no wrong if the PMLN government renegotiates the matter on realistic grounds rather than rhetoric!

    Recommend

  • Humayun
    Aug 4, 2013 - 10:13AM

    Is Pakistan’s love affair with Iran over in post Zardari scenario ?

    Is PML (N) regime not in a position to sustain US pressure on the Pak-Iran pipe line issue ?

    Recommend

  • Malik
    Aug 4, 2013 - 10:29AM

    @B that clause of penalty was abolished by PPP govt.’s in their last days… so chill and enjoy less electricity bills till they start to produce 24×7 consumption amount

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  • Naresh
    Aug 5, 2013 - 2:28AM

    @A Pakistani:This price could be feasible for Pakistan only when Iran covers the construction cost of US$ 1.3 Billion and there is no wrong if the PMLN government renegotiates the matter on realistic grounds rather than rhetoric!
    .
    From your quoted article “Pipedreams?” :
    .
    Pakistan has asked Iran to revise the price of gas downwards from 78 percent of crude to 70 percent of crude (Iran has refused to renegotiate the price downwards).
    .
    The Basic Problem is that seemingly Pakistan does not have the Financial Resources to build the Pipeline. As such it may not be possible for Iran to spare resources, Iran is under “Heavy Sanctions”, to build the Pakistani portion of the Pipeline or to lower the Price of Gas being delivered to Pakistan. Thus let us wait and see how the Cocoon Spins!
    .
    Cheers
    .

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