Three major countries Italy, Russia and China have shown interest in financing the construction of Iran-Pakistan (IP) Gas pipeline project, a senior Petroleum Ministry official said. The official said that currently an Iranian delegation is visiting Pakistan to set the modalities of financing the gas pipeline project for energy striven Pakistan.
The pipeline is likely to cost the energy-deficient country $ 1.25 billion, and will initially bring around 750 Million Cubic Feet Per Day (MMCFD) of gas, which will be gradually increased to over 1.5 Billion Cubic Feet Per Day (BCFD).
The official said that to resolve energy crisis on short-term basis the government is seriously considering initiating import of 3.5 million ton of Liquefied Natural Gas (LNG) from Qatar without providing any sovereign guarantee. When he was asked about the price of the LNG, he said that it would be around 85 percent of the brent crude oil.
It is estimated that Pakistan would pay a maximum $11/MMBtu for imported gas from Iran and $13/MMBtu from Turkmenistan and $18/MMBTU for LNG. The government on March 29 invited bids for the construction of 785 kilometres of IP pipeline from pre-qualified parties with three firms qualifying.
National Engineering Services Pakistan (NESPAK) and ILF Germany have completed the detailed route survey activity, while the government has already invited tenders for construction of IP pipeline.
As far as financing of IP project is concerned, Iran has agreed to provide $ 500 million funding for the construction of the gas pipeline, while the government of Pakistan is also generating local funds by imposing Gas Infrastructure Development CESS (GIDC) on different sectors of economy. Last year under GIDC the government collected nearly 40 billion, which would be utilised for construction of Iran Pakistan (IP) gas pipeline and/or other energy projects.
As per draft agreement, Pakistan is bound to complete IP gas pipeline project by the end of 2014 otherwise it will have to pay a daily penalty of $ 1 million to Iran. As per draft agreement of the project, the contractor will have to complete the project within two years - 2012-14. The Government of Pakistan is expected to allow exemptions in duties and taxes on the import of certain materials required for gas import projects. EPC contractors are also expected to be exempted from sales tax for services provided on such projects.
Country''s current gas demand is met entirely through domestic production which currently stands at 4,200 Billion Cubic Feet (BCF) per day. The level has been stagnant for the last few years as new gas field discoveries have been scarce after the passage of 18th amendment which has given provinces a greater role in policies.
To meet the shortfall the government is focused on import options including Iran-Pakistan (IP), Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline projects and import of LNG.
During the last decade, demand for natural gas in the country has increased by almost 10 percent annually, reaching around 3,200 Mmcfd in 2008, against total production of 3,774 Mmcfd. But, in 2009, demand for natural gas exceeded the available supply, with production of 4,528 Mmcfd against demand for 4,731 Mmcfd, indicating a shortfall of 203 mmcfd, which at present has crossed to 2,300 BCF.
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