Pakistan Government Has Ratified The $1.5 Billion Iran Pipeline Project

Pakistan government has ratified the $1.5 billion Iran pipeline project, which will bring around 750,000 Mcf/day of gas to the energy-starved country by January 2015, an official from petroleum ministry said Thursday. 

The federal cabinet on Wednesday evening approved the deal for the laying of the 785 km Pakistan segment of the pipeline that is scheduled to be completed by December 2014, the official said. 

Pakistan has been under pressure from the US to abandon the project, but has maintained its decision to pursue it as it is vital to meeting its energy needs. 

The contract will be signed by Iran's Tadbir Energy and the Pakistan Interstate Gas Company for engineering, procurement, construction and financing of the project, the ministry official added. 

Iran will provide $500 million, payable in 20 years and Tadbir Energy will build the pipeline, he said. 

Meanwhile, Asim Hussain, adviser to the prime minister on petroleum and natural gas told reporters in Islamabad that the agreement, which had already been signed, had been ratified by the cabinet. As it was a government-to-government agreement, there was no need for competitive bidding, he said. 

Almost half of the remaining $1 billion financing will be arranged through a Chinese loan and about $500 million to be raised by Pakistan through gas infrastructure development cess, he said. The Iranian loan will carry an interest at the London Inter Bank Offered Rate plus 2%, he added. 

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 analyze the project. 

A gas sales and purchase agreement signed by the two countries about two years ago requires the project to be completed by December 31, 2014. 

Pakistan is facing a gas shortfall of 1.2-1.4 Bcf/d and this is expected to worsen in the coming years. According to a central bank report, released last year, Pakistan's gas deficit could hit 3 Bcf/d by 2015-2016 if the supply situation is not rectified soon. Gas output in the country currently stands at about 4.2 Bcf/d.