The long dormant gas pipe-line from the Persian Gulf to Pakistan has been resurrected, Pakistan announced last week, with China preparing to foot the bill for most of the cost.
The pipeline would bring a huge increase in Iranian gas exports and a huge increase in revenues for Iran. Right now, Iran only exports large quantiles of gas to Turkey and small quantities to Armenia. Until last year, it was actually a net importer of gas since it had been buying large quantities of gas from Turk-menistan to supply the northeast, purchases that have now been reduced.
Under a $2 billion deal to be signed during the Chinese president’s visit to Islamabad later this month, China will build the pipeline to Pakistan.
“We’re building it. The process has started,” The Wall Street Journal quoted Pakistani Petroleum Minister Shahid Khaqan Abbasi as saying.
China is to provide 85 percent of the needed capital and Pakistan will pay the rest.
Pakistan has long needed the gas, as its own gas reserves are running short. But the money to pay for the pipeline hasn’t been available as international financing could not be obtained under US sanctions. China’s aid will presumably be dependent on the lifting of sanctions.
Pakistan has reportedly been negotiating for months with China. The much-needed gas will help Pakistan fuel its power plants and relieve it from crippling power shortages.
The pipe was conceived in 1995 as a so-called “Peace Pipeline” to take Iranian gas from the South Pars gasfield to both Pakistan and India, building a route to peace between India and Pakistan. But India dropped out—not so much because of Pakistan as because of Iranian contractual demands. Iran insisted that India pay when the gas reached the Iran-Pakistan border, not when it reached the Pak-India border. That would mean that if Pakistan kept the gas itself, India would have to pay. That was a deal-killer from India’s standpoint.
China, of course, has no interest in helping India so its departure is probably a positive selling point for China to fund the pipeline.
It wasn’t clear if China would build the pipeline or just fund it. Iran had hoped to get the construction contract. But The Wall Street Journal said Islamabad was reportedly negotiating with China Petroleum Pipeline Bureau, a subsidiary of the China National Petroleum Corporation (CNPC), to take on the project.
It includes building a 700-kilometer (435-mile) pipeline from Pakistan’s port of Gwadar to Nawabshah and hook up to the nationwide gas grid from there. Pakistan will build the remaining extension of the pipeline from Gwadar to the Iranian border, a distance of 80 kilometers (50 miles).
The oil minister also did not say what the terms of the deal would be—specifically what interest Pakistan would pay on the loan and how long it would have to pay it back.
Iran long ago completed most of the 900-km (560-mile) pipeline extending from Assaluyeh on the Persian Gulf to near its border with Pakistan. The pipeline has been supplying towns and cities all across southern Iran with natural gas.
Pakistan started construction of the pipeline two years ago. But it was just a show in which a short stretch of pipeline was soldered together for the cameras. Nothing more has been done since then.
Pakistan Foreign Office spokesperson Tasneem Aslam said last Thursday that Chinese President Xi Jinping is scheduled to visit Pakistan this month but the dates were yet to be finalized.