A Chinese firm which offered financing of $500 million for Iran-Pakistan (IP) gas pipeline has pulled out of the project after Pakistan government expressed its unwillingness to extend the bid validity period.
“After the Chinese firm’s exit from the project, the government is now banking on Iran to fully fund the laying of Pakistan’s portion of the pipeline,” a source told The Express Tribune.
According to sources, transition of power in both Pakistan and Iran in recent months has delayed engagements between the two sides, which have to discuss the crucial financing issue for the project.
“We have asked the new Iranian government to provide more than $500 million, which has already been committed, to finance the construction of pipeline in Pakistan,” an official said.
Tehran has already expressed its willingness to increase the credit limit. “The two sides are expected to meet this month to take up the proposal that Iran gives the entire financing,” the official said.
The Chinese firm, Panyn Chu King Steel Limited, which has pulled out, had been selected during bidding by Interstate Gas Systems (ISGS) as a qualified bidder, which would provide the pipeline at $1,650 per ton including compressors. The company, which also offered to arrange $500 million for the project, sought extension in bid validity but the government refused.
“This company has been refused extension and has quit the project,” the official said, adding the present government had approached Iran to seek the entire financing.
According to a senior government official, Pakistan and Iran will start negotiations on provision of funds for the pipeline if the Iranian government gives the nod.
Iran has already committed $500 million in loan for laying the pipeline in Pakistan. The total cost of the project has been estimated at $1.5 billion.
Against the $500m financing, Islamabad will award Engineering, Procurement and Construction (EPC) contract to Iranian firm Tadbir Energy.
“Now, we are waiting for a response from the new Iranian government,” the official said, adding Tehran had already told the previous government of Pakistan Peoples Party that it was willing to enhance the credit limit.
In a press conference held recently, Petroleum Minister Shahid Khaqan Abbasi also said Pakistan would renegotiate the gas price with Iran, but the latter had not been formally asked about the matter.
Under the project, Pakistan will import 750 million cubic feet of gas per day (mmcfd), which can be increased to one billion cubic feet. Of the total, the Balochistan government wants 250 mmcfd for consumption at Gwadar Port.
Published in The Express Tribune, September 5th, 2013.