IP gas project: Pakistan, Iran fail to reach agreement

February 16, 2013

ABDUL RASHEED AZAD

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Pakistan and Iran once again failed to reach an agreement on inking final contract of Engineering, Procure-ment and Commissioning of Pakistan-Iran (IP) gas pipeline project due to difference on gas price. According to sources in the Petroleum Ministry, officials from both sides failed to reach any decision on the final day of the mutual talks here on Friday.

They further stated that Iranian delegation after analysing Pakistan's demands would return to Pakistan during next week, hence inking of the contract had been postponed for a week. The sources said that Pakistan asked the Iranian delegation for reduction in gas price, upon which the visiting delegation replied that they would refer the issue to concerned Iranian authorities.

Sources further said that Iranian Company Tadbir had shown some reservations over Pakistan's demands. They added that Islamabad had handed over the draft of Engineering, Procurement and Commissioning contract to the visiting delegation. Iranian company would forward the draft of the agreement to the relevant department of the Iranian government, which would approve it in accordance with the international laws keeping in view American sanctions, the officials added. The government of Pakistan has already invited bids for construction of 785 kilometers of the pipeline project from pre-qualified parties.

According to Petroleum Ministry sources, Iran has in principle agreed to provide $500 million to Pakistan for the construction of Pakistan's side of the gas pipeline. According to the sources, work on the IP project has reached at an advanced stage as Pakistan has already completed Interim Front End Engineering Design (FEED) of the proposed IP project, while progress on TAPI is at an initial stage.

Government of Pakistan has imposed Gas Infrastructure Development Cess (GIDC) on all the gas consumers to finance the construction of the imported gas projects like IP, Liquefied Natural Gas (LNG), Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline projects and other energy projects. Iran has assured Pakistan to provide $500 million funding for the Project and as per draft agreement Pakistan is bound to complete the project by the end of 2014, otherwise it will have to pay a daily penalty of $1 million to Iran.