Fall of another contractor: Chinese firm pulls out of IP pipeline project

Published: September 5, 2013
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According to a source, 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. ILLUSTRATION: JAMAL KHURSHID

According to a source, 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. ILLUSTRATION: JAMAL KHURSHID

ISLAMABAD: 

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.

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Reader Comments (13)

  • Ariba
    Sep 5, 2013 - 2:06AM

    Thanks to Nawaz Sharif.

    Recommend

  • TTP-Lover
    Sep 5, 2013 - 2:10AM

    all weather friend has gone in summers……….but dont worry……..we have USA and russia…..we ill get something from them…….and this time we will take legitimately………………..no begging…..

    Recommend

  • np
    Sep 5, 2013 - 2:48AM

    I see. So no money to build the pipeline. No money to pay for gas (we will renegotiate theprice down from what is contactually agreed), all Pakistan has desire to get gas. What’s in it for Iran?Recommend

  • Sandip
    Sep 5, 2013 - 3:36AM

    Wow – couple of things here. Where did the “higher than mountain, deeper than ocean” etc etc friendship disappear? Will our Pakistani friends wake up to the fact that all these countries only watch out for their interests. Hence trying to think that the friendship is more than what it is, is delusional.
    Secondly, this must be the only country that makes the seller pay for selling its goods, shows red eyes to a country for money that it is getting as grant, snarls at its biggest benefactor. This is indeed one of its kind country in the whole wide world.

    Recommend

  • vasan
    Sep 5, 2013 - 5:36AM

    Wow, wow, wow. What a sweet deal. Iran will finance, provide materials, execute the pipe laying inside Iran and Pakistan as well. Iran will also provide gas on a deferred payment scheme at a concessional price (God knows how long the deferral will be). Will Iran provide gas stoves to the homes, lay the pipes to the household in the last mile, make rotis and dhall so that Pakistanis can eat comfortably. You guys must be living in lala land.
    Just a small question. Why should Iran do all this ? what is that Pakistan has brought to the table.

    Recommend

  • Ahsan
    Sep 5, 2013 - 6:03AM

    Pak-China friendship according to Nawaz Sharif is “sweeter than honey”. He forgot to say that honey is made from bee that are label ‘Made in Chine’.

    Recommend

  • EastPak
    Sep 5, 2013 - 8:10AM

    Made in china….no guarantee , no warranty. so friendship may easily become bitter than bitter melon and thinner than paper.

    Recommend

  • Hizbul
    Sep 5, 2013 - 8:12AM

    Mind it friendship “made in china”.

    Recommend

  • goldconsumer
    Sep 5, 2013 - 9:26AM

    @vasan:
    Well actually Iran is doing all that. Whats in it for Iran? Since its old friend India backed out due to US pressure even after initially aggrement, what choice did Iran have? they are already feeling lonely in econimic terms. Selling the gas on international shipped gas rates (LNG) and sucking the penny out of their muslim brothern is the best thing to do in hard times, isnt it?
    And why shouldnty chinese firms back out from his deal. Apparently Nawaz Sharif is himself not interested in this project after all. He is relying on his “trusted” chinese friends to build them 2x1000MW nuclear reactors anyway.

    Recommend

  • syed baqar ahsan
    Sep 5, 2013 - 10:06AM

    Irony is nobody is watching countries interest,succumb to USA pressure,may be this was the pre-condition to get $6.5b IMF loan.Because in PAKISTAN lot of things are entangle with USA desire with the help of sold bureaucracy. They are only competent for their personal growth, country is not their priority accept visiting world wide accept gifts.

    Recommend

  • Np
    Sep 5, 2013 - 10:57AM

    @goldconsumer:
    India did not reach an agreement with Iran on gas pricing nor did it reach an agreement with Pakistan on 2 key issues:
    1) transport charge to be paid to Pakistan
    2) guarantees from Pakistan in case there were attacks on the pipeline after India had spent billions to build it.

    In absence of these agreements, India never signed a contract, so no question of backing out.
    In any case India buys more from Iran than Pakistan at this point, so the issues you raise are not factual. Plus even if Iran is isolated, why should it use up it’s existing resources financing a pipeline to a country which does not have the wherewithal to pay?

    Recommend

  • waseem
    Sep 5, 2013 - 1:25PM

    @Sandip:
    Just hold your jealousy my friend across the border and read the news article.
    Firm requested to increase validaity of the bid, and on Govt’s refusal they quit, a technical process.
    this for sure is not a Govt to Govt deal, this is between one company and the other.

    Recommend

  • shujath
    Sep 5, 2013 - 7:24PM

    Why the PML N govt didn’t the extend the validity period of the bid ?? By refusing to extend the bid validity, PML N gov’t has lost the crucial 500 million dollars finance for IP project. Why was it not possible for PML N gov’t to extend the bid validity period ??? Or Did they do it wantedly ??? Pakistan should take gas even if it comes at higher prices, because during shortage of gas, Industry will agree to pay high price for gas..
    Otherwise, Iran may start converting gas into Liquified Natural Gas ( LNG ) and export to China or India, by ships. Then , Pakistan will not get gas at all, even if it wants to pay the double price.

    Recommend

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