Pakistan: IP Pipeline to Be Completed in 2 Phases

Pakistan: IP Pipeline to Be Completed in 2 PhasesPakistan: IP Pipeline to Be Completed in 2 Phases

While admitting its failure to complete Iran-Pakistan gas (IP) pipeline project on time, Pakistan reaffirmed its commitment to the visiting Iranian minister to complete the project in two phases.

“Pakistan has been unable to complete the projects on its side due to international sanctions on Iran,” Pakistani Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi said at the sidelines of the 19th session of the Pakistan-Iran Joint Economic Commission (JEC).

Despite Pakistan’s best efforts banks, international contractors and equipment suppliers were not ready to be involved in this project, Abbasi informed the visiting Iranian Minister for Economic Affairs and Finance Ali Tayyebnia, Pakistani newspaper Dawn reported Tuesday.

"The IP gas pipeline project is vital for the Pakistan’s energy needs and the government is fully committed to complete the project."Abbasi said, adding: “We are now planning to complete this project in two steps. First, we are installing LNG terminal at Gawadar Port and secondly, a 42-inch pipeline of 700km length will be laid from Gawadar to Nawabshah for onward transmission of gas to the northern parts of the country.”

However, he pointed out that banks, international contractors and equipment suppliers were not ready to get involved in the project owing to international sanctions on Iran. He said Pakistan is therefore in talks with Chinese companies for construction of this pipeline and the 70km portion of the pipeline from Gawadar to Iran border will be completed by Pakistani companies.

Pakistan has also signed an initial deal for the award of a $3 billion LNG terminal and pipeline contract to China. “This will be discussed with Iranian authorities in the upcoming Joint Ministerial Commission meeting,” the Pakistani official said.

Tayyebnia expressed his desire for Iranian gas to flow into Pakistan soon so that Pakistan may be able to overcome its energy shortfall.

The pipe laying project within Iran's border was carried out at a cost of $2.5 billion, however, the 780 km pipeline due in Pakistan has not been laid due to funding difficulties faced by the Pakistani government.

Iran extended the time limit for the construction of IP pipeline project, waiving off the$3 million penalty per day, which was due on Pakistan from 1st January 2015 for delays on construction of the pipeline in time.

Power Deal

Officials say Pakistan had signed a memorandum of understanding (MoU) with Iran for the import of 1,000 megawatt (MW) electricity but progress on the plan stalled in the wake of international restrictions.

On the import of energy from Iran, both sides will also discuss the import of 74MW power from Iran for Mekran Division, Balochistan; 100 MW from Iran to Gwadar and 1000MW from Iran for Balochistan and the national grid.

Separately, 73 MW was being imported from Iran to meet the needs of Gwadar, but payments could not be made since 2011 as no bank was ready to offer its services for clearing the outstanding amount worth millions of dollars.

The government in Islamabad has even failed to pay dues from barter trade also because of the reluctance of banks and shipping companies, according to Dawn.

“In the JMC, officials will discuss the progress on the 1,000 MW power import plan and suggest ways how to move forward in the face of restrictions,” the official said.

Negotiations on the electricity price could take around six months and there are hopes that in the meantime issues will be settled between Tehran and Washington.

Pakistan is now studying Turkish and Indian models to clear earlier power bills of Iran owed to energy firm Tavanir.

Turkey is making payment against supply of gas by offering precious metals like gold to Iran. India, on the other hand, is paying for the import of petroleum products through a local bank which does not have branches worldwide.

Officials said these models would be discussed with the Iranian authorities in the upcoming meeting.

The US imposed tough sanctions on Iran to curb the country's nuclear program which it claims is geared to military use. Iran insists its program is peaceful. Iran and the P5+1 group (the five permanent members of the UN Security Council, namely United States, Russia, China, United Kingdom, and France, plus Germany) have been holding marathon talks over the past year to thrash out a mutually acceptable comprehensive deal.

During the 24 November meeting, Iran and the six powers failed for a second time this year to resolve the 12-year dispute over Tehran's nuclear ambitions, and gave themselves seven more months to resolve the deadlock that has prevented a deal.

Tayyebnia informed that Iran’s negotiations with the international community on nuclear issue have been successful and hoped that the applicable sanctions will be removed very soon. He further expressed his hope that with the removal of international sanctions Iran’s trade volume and economic relations with its neighbors would further improve.

He also said that Iran has great potential to export petrochemical products, electricity, and fertilizers and offered Pakistan to benefit from these opportunities available in its neighborhood.