Iran-Iraq Gas Pipeline Tender to Be Announced

Iran-Iraq Gas Pipeline Tender to Be Announced
Iran-Iraq Gas Pipeline Tender to Be Announced

The government is to call on private investors willing to bid for the pipe-laying project as part of the construction of pipelines and gas stations to transfer Iran's gas to Iraq in the near future, managing director of the Iranian Gas Engineering and Development Company said, IRNA reported Sunday.

The public tender, valued at $1.5 billion, concerns fulfillment of the project in the form of build, operate, transfer (BOT) agreement, Alireza Gharibi said, adding that capital costs are to be fully reimbursed through the revenues generated by the exported gas to Iraq.

Construction of the pipeline, which will pass through Shalamcheh and Basra, will expand the capacity of gas export to the western neighbor. To transfer gas to Iraq two routes have been mapped out, which will include Basra and Baghdad. The pipeline for the latter is near completion, and gas export thereby is expected to commence in May.

Tehran and Baghdad signed a draft deal in 2013 to transfer Iran’s gas to two Iraqi power plants. The agreement is aimed at supplying Al-Baghdad and Al-Mansouriyah power plants in Iraq with 25 million cubic meters (mcm) per day of natural gas.

According to preliminary agreements, four million cubic meters (mcm) of gas will be transferred to power plants in Baghdad, with the figure ultimately expected to reach 25 mcm. Only seven kilometers of the pipeline remains uncompleted on the Iraqi side, which will be shortly laid, Azizollah Ramezani, director of international affairs at the National Iranian Gas Company said.  

The second route will pass through Basra, with an ultimate capacity of 35 mcm. Total gas export capacity to Iraq could possibly increase to 70 mcm.

The project, if sufficiently funded, involves construction of pipelines and other relevant gas export appliances, including gas transfer stations at Dezful-Kuhdasht, Kuhdasht-Bisotun, Kuhdasht-Chahar Meleh, Bisotun-Kermanshah, Ahvaz-Khoramshahr, Khoramshahr-Shalamcheh, as well as construction of compressor stations, gas pressure control and metering stations.

Pipe-laying operations and construction of gas pressure control and metering stations are projected to be carried out in one year. Building compressor stations is expected to take two years.

The project is estimated to cost around $1.5 billion. Nevertheless, having had won the tender the investor is required to conduct a precise assessment of the costs and expenditures.

Reimbursement will be in three years posterior to commencement of gas exports. After a six-month grace period following start of exports, repayment is to be made in five installments, every six months. These will cover 10, 15, 20, 25, and 30 percent of the full capital costs as per installment, respectively.

Financial capability, management experience, and provision of a $3.4 million guarantee to take part in the tender are among the prerequisites for potential bidders, Gharibi noted.

Preliminary agreements have also been reached for export of gas to Oman, Kuwait, and UAE.

Iran sits on the world's largest gas reserves, according to the latest statistics compiled by BP. It holds 17% of the world's proved natural gas reserves.