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Pakistan seeks $2bn from Iran to build gas pipeline

09 October, 2013

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ISLAMABAD: Pakistan has asked Iran for $2 billion in financing to build its side of a controversial gas pipeline that has drawn threats of US sanctions, the petroleum minister said Tuesday.

The Iranian side of the $7.5-billion project is almost complete, but Pakistan has run into repeated problems paying for the 780-kilometre section to be built on its side of the border.

Petroleum Minister Shahid Khaqan Abbasi told AFP on Tuesday that the preparatory work was complete, but they had asked Iran to provide $2 billion for the construction work. "All these issues will be discussed in a meeting which we have requested, but so far there is no reply from the Iranian side," Abbasi said.

"They were busy in cabinet formation and I hope that this meeting will take place within this month." It is the latest setback to hit the long-delayed section of the pipeline that would link the two neighbours and help ease Pakistan's chronic gas shortages.

US officials have warned that the project would risk triggering sanctions aimed at Iran. But Abbasi denied coming under pressure from Washington since Prime Minister Nawaz Sharif came to power in the May general election. "Americans have not so far talked about this pipeline with us at any level," he said.

Asked if Pakistan was hoping to complete the project before the December 2014 deadline, Abbasi replied: "Anything is possible, if we have the resources." "It depends on the financing and availability of the machinery," he added. Iran has the second largest gas reserves in the world but has been strangled by a Western embargo that has seen its crude exports halved in the past year.

It currently produces around 600 million cubic metres of gas per day, almost all of which is consumed domestically due to lack of exports. Its only foreign client is Turkey, which buys about 30 million cubic metres of gas per day.

The Karachi Stock Exchange took fright when the countries' then-presidents Mahmoud Ahmadinejad and Asif Ali Zardari inaugurated the much-delayed section of pipeline in March. Spooked by fears of US sanctions, the main index slumped almost 2.5 percent.

Abbasi said that the government had sought bids from Pakistani and Iranian companies for pricing of the construction cost of the pipeline. He said that due to shortages of gas in winter, all compressed natural gas (CNG) stations in Punjab will be shut down from November to January.

"Our first priority are domestic consumers during the winters, so there will be no gas for motor transport in Punjab," Abbasi said.

End.

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