Cabinet ratifies Iran pipeline agreement

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ISLAMABAD: Despite intense US pressure, the federal cabinet approved on Wednesday a $1.5 billion government-to-government deal with Iran for laying the 785km Pakistan segment of a pipeline to deliver 750 million cubic feet of natural gas per day (MMCFD) of Iranian gas by the end of next year.

The contract will be signed by Iran’s Tadbir Energy and Pakistan Interstate Gas Company (ISGC) for engineering, procurement, construction and financing of the project.

Iran will provide a $500 million financing payable in 20 years and Tadbir Energy will lay the pipeline through its sub-contractors.

According to Prime Minister’s Adviser on Petroleum and Natural Resources Dr Asim Hussain, the agreement, which had already been ‘initialled’, was ratified by the cabinet. Because it was a government-to-government agreement, there was no need for competitive bidding, he said. Almost half of the remaining $1bn financing will be arranged through a Chinese loan and about $500m to be raised by Pakistan through gas infrastructure development cess (GIDC).

The Iranian loan will carry an interest at about London Inter Bank Offered Rate (LIBOR) plus two per cent.

According to an official statement, a committee comprising ministers for finance, law and justice, petroleum and natural resources and the governor of the State Bank of Pakistan was formed to further analyse the project.

An official said the committee would finalise a term-sheet with Iranian authorities for financing arrangement including mark-up and repayment details. A gas sales and purchase agreement signed by the two countries about two years ago required the project completion by Dec 31, 2014.


Courtesy: Dawn

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