ZAFAR BHUTTA
ISLAMABAD (July 23 2009): Iran faced opposition from within on Iran-Pakistan (IP) gas pipeline deal as Iranian Oil Ministry had strongly opposed signing of Gas Sales Purchase Agreement (GSPA) in Turkey due to security concerns, fearing that Jundallah Group may create hurdles in materialising the project.
Sources told Business Recorder that Jundallah, which is reported to have roots in Balochistan, has been source of worry for Tehran as Iranian Oil Ministry had clearly informed its government that Jundallah Group would hinder the IP project. Iranians also believe that Gulf countries would not let the deal go through smoothly with the view that if the Zardari government failed to materialise the project, it would be scrapped forever.
"Presidents of Iran and Pakistan made all-out efforts to sign GSPA on IP despite strong opposition of United States (US). Sources said that the President of Pakistan also tried to have exemplary relations with Iran as Islamic brotherly countries had not extended financial support to Pakistan despite repeated requests. Zardari enjoys good relations with Iran as it was the first Islamic country that extended oil import facility on deferred payment.
After signing the GSPA on IP, some forces have been active to suspend further working on the project as they consider that it is not financially and strategically viable. They are also of the view that Pakistan would not be able to secure funds for the project due to US opposition.
Some experts believe that the government had signed GSPA at higher rates, linking gas price with 78 percent of crude oil, but sources said that Iran was already getting gas from Turkmenistan at $10 per MMBTU. Iran was also exporting gas to Turkey linking gas price to 85 percent of crude oil.
Sources said that the UAE state-run International Petroleum Investment Company (IPIC) and Chinese National Petroleum Corporation (CNPC) have offered Pakistan to carry out Iran-Pakistan (IP) gas pipeline project eyeing some profitability, which was confirmed by Advisor to Prime Minister on Petroleum and Natural Resources Dr Asim Hussain.
Under the government financing plan, it would secure funds from a consortium of domestic and international investors and these two companies may become part of 'Pipe Company' in executing IP gas pipeline project. Sources said that UAE state run company IPIC has offered 60 percent investment for the project and the government is considering the offer. IPIC is already share holder in Pak-Arab Refinery (Parco) in Pakistan.
According to sources, the government has planned IP project to be funded at a debt:equity ratio of 70:30, debt financing of $872 million and equity investment of nearly $373 million. Following the strategic nature of the project, the government has also planned that public sector entities (PSE) may hold major shares in 'Pipe Company', proposed to carry out the project.
The capital cost of the 42-inch pipeline has been estimated at $1.25 billion to transmit gas from Iran. The project envisages import of 750 million cubic metres daily (MMcfd) and it will be completed in around 4 years. The Iranian imported gas will enable Pakistan to generate around 4000 Megawatts (MW) electricity per day.
The consultant on IP project shall undertake the bankable feasibility/ FEED/ DRS to firm up the project cost and subsequently approach the market for project financing. The physical construction on the pipeline shall start in 2010, and the first flow of the gas shall be available in 2013.
According to an analysis by Petroleum Ministry, imported Iranian gas will result in annual saving of $1 billion over import of furnace oil (at crude oil price of $50 per barrel). Similarly, there will be an annual saving of $735 million if equivalent quantity of LNG is imported. The savings will increase in line with the increase in global crude oil price.
Sources told Business Recorder that Jundallah, which is reported to have roots in Balochistan, has been source of worry for Tehran as Iranian Oil Ministry had clearly informed its government that Jundallah Group would hinder the IP project. Iranians also believe that Gulf countries would not let the deal go through smoothly with the view that if the Zardari government failed to materialise the project, it would be scrapped forever.
"Presidents of Iran and Pakistan made all-out efforts to sign GSPA on IP despite strong opposition of United States (US). Sources said that the President of Pakistan also tried to have exemplary relations with Iran as Islamic brotherly countries had not extended financial support to Pakistan despite repeated requests. Zardari enjoys good relations with Iran as it was the first Islamic country that extended oil import facility on deferred payment.
After signing the GSPA on IP, some forces have been active to suspend further working on the project as they consider that it is not financially and strategically viable. They are also of the view that Pakistan would not be able to secure funds for the project due to US opposition.
Some experts believe that the government had signed GSPA at higher rates, linking gas price with 78 percent of crude oil, but sources said that Iran was already getting gas from Turkmenistan at $10 per MMBTU. Iran was also exporting gas to Turkey linking gas price to 85 percent of crude oil.
Sources said that the UAE state-run International Petroleum Investment Company (IPIC) and Chinese National Petroleum Corporation (CNPC) have offered Pakistan to carry out Iran-Pakistan (IP) gas pipeline project eyeing some profitability, which was confirmed by Advisor to Prime Minister on Petroleum and Natural Resources Dr Asim Hussain.
Under the government financing plan, it would secure funds from a consortium of domestic and international investors and these two companies may become part of 'Pipe Company' in executing IP gas pipeline project. Sources said that UAE state run company IPIC has offered 60 percent investment for the project and the government is considering the offer. IPIC is already share holder in Pak-Arab Refinery (Parco) in Pakistan.
According to sources, the government has planned IP project to be funded at a debt:equity ratio of 70:30, debt financing of $872 million and equity investment of nearly $373 million. Following the strategic nature of the project, the government has also planned that public sector entities (PSE) may hold major shares in 'Pipe Company', proposed to carry out the project.
The capital cost of the 42-inch pipeline has been estimated at $1.25 billion to transmit gas from Iran. The project envisages import of 750 million cubic metres daily (MMcfd) and it will be completed in around 4 years. The Iranian imported gas will enable Pakistan to generate around 4000 Megawatts (MW) electricity per day.
The consultant on IP project shall undertake the bankable feasibility/ FEED/ DRS to firm up the project cost and subsequently approach the market for project financing. The physical construction on the pipeline shall start in 2010, and the first flow of the gas shall be available in 2013.
According to an analysis by Petroleum Ministry, imported Iranian gas will result in annual saving of $1 billion over import of furnace oil (at crude oil price of $50 per barrel). Similarly, there will be an annual saving of $735 million if equivalent quantity of LNG is imported. The savings will increase in line with the increase in global crude oil price.
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