Pakistan and Iran likely to sign pact on gas pipeline
Pakistan and Iran are likely to sign an agreement on the construction of Iran-Pakistan gas pipeline project during the upcoming Iran visit of President Asif Ali Zardari, scheduled to start from December 7 (tomorrow).
Copyright Business Recorder, 2012
According to sources privy to the development, both the countries have agreed, in principle, to engage local companies in the construction of the 785- kilometer-long gas pipeline project, which would initially carry 750 Million Cubic Feet per Day (MMCFD) gas and extendable to one Billion Cubic Feet gas per Day (BCFD).
"During the upcoming visit of the President, all matters relating to the project would be finalized," they said, adding that Pakistan's Frontier Works Organisation along with an Iranian company are like to complete the project. Sources said that Pakistani and Iranian teams have finalised the draft of the Inter-Governmental Co-operation Agreement (IGCA).
Recently, the Prime Minister's Adviser on Petroleum and Natural Resources concluded a visit to Iran where he met with top officials, including Iran's President Mahmoud Ahmadinejad. Sources maintained that the Iranian government had agreed to Pakistan's request of providing $500 million in two tranches for construction of Iran-Pakistan (IP) gas pipeline and an agreement in this connection will be inked during the President's visit.
Islamabad plans to avail this financing to acquire engineering and construction materials to lay its portion of the pipeline, which will be carried out in a joint venture with Iranian companies and local gas utilities including Sui Northern Gas Pipelines (SNGPL) and Sui Southern Gas Company (SSGC).
In addition to Iranian financing, Islamabad seeks to avail the buyer's credit facility to pay for the import of building materials. The government will also raise Rs 30 billion during the current financial year through the Gas Infrastructure Development Cess (GIDC) - a tax levied on domestic gas consumers.
"Both the countries are going to sign this much awaited agreement during upcoming visit of Asif Ali Zardari, President of Pakistan to Iran," sources said, adding that Iranians were concerned about the progress of the project and wanted assurance that there would not be any further delays to lay Pakistan's portion of gas pipeline so that gas supply can begin in December this year. The government has already invited bids for construction of the pipeline from pre-qualified parties.