Iran and Pakistan Agrees to Proceed (IP) Gas Project

by Arif Qoreshi:

Islamabad: The technical teams of Iran and Pakistan discussed on financing options for the Iran-Pakistan (IP) gas pipeline construction to take the project forward for its completion within the scheduled time frame. The Iranian team is led by Deputy Minister for Internal Affairs on Petroleum Dr Khalid while Additional Secretary Petroleum Abid Saeed represented the Pakistani side.

The Iranian delegation showed  displeasure over  the slow pace of work in the construction of gas pipeline on the Pakistani side, reminding that gas supply should start by December 31, 2014, or Islamabad would have to bear heavy fine worth of one million dollar on daily basis.

Iran Pakistan gas pipeline

The cost of the IP gas pipeline is estimated at $1.5 billion and scheduled to be completed by 2016. Pakistan has to construct 781km gas pipelines and the Russian company, PJSC Stroytransgaz, would offer its services to complete the IP pipelines.

Iran, China, Italy and Russia are interested in financing the project, however, discussion on financing arrangements would continue in the near future to secure a favorable deal, a senior official at Pakistan’s Petroleum Ministry said Tuesday.

What will Pakistan benefit?

The 785-km gas pipeline from MP 250, a point at the Pak-Iran border, to Nawabshah is scheduled to be commissioned by December 2014 and this project will inject 750 mmcfd gas into Pakistan’s system. Pakistan is currently facing a huge gas deficit of over 2 billion cubic feet per day as its production stands at 4.2 billion cubic feet. The import of gas from Iran will help ease the gas deficit in the country to a reasonable level.

Threats to the project

Ahmer Bilal Soofi, an eminent international law expert, is of the view that Pakistan will not be able to realize this project. “Under the United Nations (UN) sanctions against Iran, the income from any commercial deal with any country cannot be used for the up-gradation of Iran’s nuclear programme. Since the UN will determine whether the income of the deal is being used for the nuclear programme of Iran, this project is a non-starter,” said Soofi. “The project is not suffering because of our faults; rather, the project is not going ahead because of Iran’s nuclear programme, due to which no one is ready to fund the project.”

Discussions between delegates

During the meeting, the visiting delegation informed the Pakistani side that Iran had completed the construction of two-gas pipeline on its side. Officials of the Pakistani Ministry of Petroleum and Natural Resources informed the meeting about its advancement towards reaching an agreement with Russia in the construction of IP gas pipelines. They further told that Pakistan while giving its assurance to Iran over the purchase of Iranian gas in time has told that tenders had already been called for the engineering, procurement and construction.

Iranian offers

Iran had already offered $500 million, compressors and necessary material of pipelines to materialize project in time. Iranian delegation  once again offered financial support and technical assistance to Pakistan.

Iran has also offered to set up an oil refinery in Pakistan. Earlier, it had discussed a plan to lay an oil pipeline to Gwadar where a refinery would be set up to process crude oil. Until one and a half years ago, two Pakistani refineries had been importing Iranian crude oil on three-month credit, but supply stopped afterwards as banks showed reluctance to open letters of credit following imposition of US sanctions on Tehran.

decision

The two sides decided to include experts from technical, legal, financial and commercial sectors in the Joint Working Group (JWG) to expedite the Iran-Pakistan Gas Pipeline Project.

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