Bloomberg News

Pakistan Seeks Russia’s Help to Finance Iran Gas Pipeline

March 29, 2012

Officials from Pakistan’s petroleum ministry will travel to Russia early next month for talks with Gazprom OAO (GAZP) as the South Asian country seeks financial and technical help to revive a stalled gas pipeline from Iran.

Pakistan is exploring different options and a visit by technical experts to Russia is part of those efforts, Abdul Basit, a spokesman for Pakistan’s foreign ministry, told reporters in Islamabad today. The nation is struggling to finance the $1.3 billion pipeline, already delayed by a decade, in the face of sanctions over Iran’s nuclear program.

New sources are crucial to Pakistan’s attempts at easing its worst energy crisis as power blackouts for as long as 18 hours a day in major cities crimp economic growth and trigger street protests against Prime Minister Yousuf Raza Gilani’s government. The $175 billion economy grew 2.4 percent in the year through June 2011, one of the smallest expansions in a decade, according to official data.

The ministry of finance on March 13 said a consortium of Industrial and Commercial Bank of China and Pakistan’s Habib Bank Ltd. (HBL) is showing “less interest” in the pipeline project. The country may impose a tax on consumers, or seek government- to-government arrangements with Iran, China and Russia to build the pipeline, the ministry said the same day.

Alternative Project

Pakistan is responsible for completion of the pipeline by 2014, a deadline agreed by the two countries in 2010 after political and security concerns delayed the project. Under the agreement, Iran will provide about 21.5 million cubic meters of gas a day to Pakistan for 25 years. The deal can be extended by five years and volume may rise to 30 million cubic meters a day.

U.S. President Barack Obama has publicly supported an alternative gas pipeline project, from Turkmenistan to Afghanistan, Pakistan and India, that would bypass Iran. The U.S. and its allies have tightened sanctions against Iran saying the Islamic Republic’s nuclear program is a cover to make weapons, while the Persian Gulf country has said it is only for peaceful civilian purposes.

Pakistan’s gas shortfall is forecast to reach 2.22 billion cubic feet a day in the fiscal year that began July 1, according to government data. The pipeline will carry gas from the South Pars field via Baluchistan province in southwest Pakistan to an off-take point in Nawabshah. South Pars, which extends from Qatar’s North Field, is the largest known gas deposit in the world.

To contact the reporter on this story: Haris Anwar in Islamabad at hanwar2@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg in Hong Kong at phirschberg@bloomberg.net


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