A China-led consortium appointed as financial advisor for Iran-Pakistan gas pipeline

TEHRAN,Dec.24(MNA)--The government of Pakistan has formally appointed the Industrial and Commercial Bank of China-led consortium that also includes leading local banks, as financial advisor (FA) for the $1.2 billion Iran-Pakistan (IP) gas pipeline that will bring 750 million cubic gas per day (mmcfd) to Pakistan. This was decided in the Economic Co-ordination Committee's Steering Committee on Iran-Pakistan (IP) and Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline projects, held on Thursday. The meeting was presided over by Dr Asim Hussain Federal Minister for Petroleum and Natural Resources and was attended by Foreign Minister Hina Rabbani Khar, Balochistan Chief Minister Nawab Mohammad Aslam Khan Raisani, Federal Board of Revenue Chairman, Board of Investment Chairman, Secretary Finance Division, Acting Chairman Ogra, Chairman EOBI, MD Parco, representatives of the Law Division, Planning Commission, National Bank of Pakistan and other senior officials of the Petroleum Ministry. Muhammad Ejaz Chaudhry, Secretary Petroleum briefed the committee on the progress made on IP and TAPI projects. Inter State Gas Company Ltd (ISGCL) Managing Director Mobin Saulat gave a detailed presentation on appointment of financial advisor, implementation of Iran-Pakistan gas pipeline project, security of IP pipeline during route survey and construction and signing of TAPI Gas Sale Purchase Agreement (GSPA). Members of the ECC Steering Committee agreed in principle to recommend the proposals regarding implementation of IP and TAPI gas pipeline projects to the Economic Co-ordination Committee (ECC) and appointment of financial consultant. These proposals include government backed guarantees, model of financial consultancy and gas pricing formula for both pipeline projects. According to officials of the Petroleum Ministry, the meeting gave the go-ahead to the relevant department to start the gas projects. IP pipeline project will bring in 750 mmcfd gas, first gas flow of which is expected in 2014 with an estimated cost of $1.2 billion. The project involves construction of 781-km gas pipeline from Iran Pakistan border to Nawabshah that would inject gas into transmission system of the two gas utility companies. The 1680 kilometres long TAPI gas pipeline project aims to bring natural gas from the Yolotan/Osman and adjacent gas fields in Turkmenistan to Afghanistan, Pakistan and India at an estimated cost of $7.6 billion. The project will take between 4 to 5 years to complete after signing of all contracts. Under the TAPI, a total 3.2 billion cubic feet of natural gas per day (bcfd) would be imported from Turkmenistan of which Afghanistan's share is 500 mmcfd, Pakistan's 1,325 mmcfd and India 1,325 mmcfd. Officials added that financial advisor will assist ISGS in determining an optimal capital structure and financing plan for the project and for providing political and commercial risk cover. It will be responsible for managing the entire transaction up to financial close including help in arranging financing. To avoid US pressure, a segmented approach has been adopted for the project and both Iran and Pakistan are responsible for building and operating the pipeline transportation network relating to the project in their respective territories. ISGS is responsible for the Pakistan segment of the project, which is estimated to cost $1.2 billion based on the recent provisional cost estimates. Estimated gap between demand and supply of gas in Pakistan is projected to increase from 1.6 bcfd in 2011-12 to over 2.5 bcfd in 2014-15. The government has already decided to dedicate imported gas through IP pipeline for power sector as power shortage is projected to increase over 11,000 MW in next few years. The decision was made considering economic feasibility of Iranian gas as compared to the price of other alternative fuels such as furnace oil, LNG and coal. The government is expecting to generate about Rs 57 billion per annum through recently imposed Gas Infrastructure Development Surcharge (GIDS) on major gas consumers excluding domestic and petroleum levy on LPG, which would be utilised for the construction of IP, TAPI and LNG gas pipelines projects.