PACT INKED FOR SETTING UP PAK-IRAN INVESTMENT COMPANY

PIIC would be established with an asset of USD 25 million that would be equally shared by the two governments

FROM: SHAMIM AHMED RIZVI,
Islamabad

Jan 15 - 21, 2007

The establishment of Pak-Iran Investment Company (PIIC) will open a new era of further strengthening economic ties between Pakistan and Iran. The PIIC would facilitate massive investments in Pakistan's oil, gas, mineral and power sectors in near future.

The Iranian delegation that had inked the agreement to set up the PIIC held detailed and separate meetings with Federal Minister for Privatization and Investment Zahid Hamid and Minister for Petroleum and Natural Resources Amanullah Khan Jadoon last week. The leader of the delegation Darvishzadesh, Chairman/MD Iran Foreign Investment Company, informed that from now on they would focus towards the implementation phase of the accord. He recalled that PIIC would be established with an asset of US $ 25 million, which both the governments, would equally share. "We intend to invest out of Iran in the power, petrochemical and other sectors and would identify new areas and sectors for investment," he said. The delegation members lauded Pakistan's economic achievements and desired to benefit from its privatization experience.

The other members of the delegation included Seyed Mansoor Mir Abedeni, Deputy Chairman Iran Foreign Investment Company, Dr. Morteza Adel Gholamzadeh, Consultant Law and Mashaallah Shakeri, Ambassador of the Islamic Republic of Iran to Pakistan.

Secretary Board of Investment Talat Mian and acting MD Pak-Iran Investment Company Istaqbal Mehdi were also present during the meeting. The leader of the Iranian delegation termed the setting up of joint venture a far-reaching step towards promoting multi dimensional cooperation between the two countries at a fast pace. He evinced interest in Pakistan's oil, gas and mineral sectors and hoped that Pak-Iran Investment Company would participate in the upcoming oil and gas projects for their mutual benefit.

The Minister for Privatization and Investment assured Pakistan's full support to make the investment company an effective tool for the investors of both the countries. It would generate economic activities for both by identifying new areas for investment and would benefit people of both the countries, he added.

Zahid Hamid said that Pakistan's investment-friendly policies have yielded record results as witnessed during the past financial year 2006, which touched the record level of US $ 3.5 billion and this accelerating trend was also evident during the first half of the current fiscal year by setting new record of FDI till December as close of US $ 3 billion going to increase further in the coming half. Pakistan has comprehensive and broad based privatization program, which provided exciting and attractive opportunities and PC Ordinance 2000 has given statuary cover to the whole process, he added. The minister further informed the delegation that the country's" economy was growing at the rate of 7% which expected to continue. Pakistan has so far privatized 162 public sector units, raising US $ 7 billion since 1991, while 87% of the privatization was completed during the recent seven years, realizing around US $ 6 billion.

The delegation also had a meeting with the minister and high officials of the Ministry of Petroleum and Natural Resources and expressed the desire to invest in jointly setting up an oil refinery and naphtha cracker projects. Welcoming the Iranian delegation, the minister felicitated on the establishment of Pak-Iran Investment Company which would help boost the existing level of interactions between the two brotherly countries in diversified fields.

The minister said that there existed a lot of potential for the joint venture investment in oil refineries, LNG, LPG, CNG, coal power generation, gas pipeline and mineral projects. He said that the government would welcome joint ventures" maximum participation in the oil and gas development activities for their mutual advantage. He said that the government has devised an ambitious energy plan to utilize the vast social deposits of Thar, Lakhra and Soda Jerruk for power generation of 20,000 MW by 2020 and added that the joint venture could also benefit the two countries to learn a lot from each other's experience in coal power generation sector.

The Chairman of Iranian Foreign Investment Company termed the setting up of joint venture as a far-reaching step towards promoting multi dimensional cooperation between the two countries. He evinced interest in Pakistan oil, gas and mineral sectors and hoped that Pak-Iran Investment Company would participate in the upcoming oil and gas projects for their mutual benefit. Ambassador of Iran Mashallah Shakeri, acting Chairman of Pak-Iran Investment company Istaqbal Mehdi, Additional Secretary Petroleum Shaukat Hayat Durrani, Senior Joint Secretary (Development) Jehangir Khan and Director General (Minerals) Rasheed Hussain Malik were also present.

Meanwhile, IPI gas pipeline project is all set to be started within three months. As soon as Iran, India and Pakistan would agree to decide a price mechanism the project will kick off very soon, a highly placed source in the ministry told PAGE. The source said that the price suggested by the experts was 4.5 to 5.5 dollars per square feet while Iran had offered 8 dollar per square feet. Pakistan however, did not agree on this price. The source further disclosed that Iran has recently agreed to fix the gas price at 6 dollar per square feet and hoped that Pakistan and India would soon finalise with Iran on the new price structure.

However, India had shown flexibility on the price and the three countries had agreed recently to hire a consultant to determine a gas price that India should pay that takes into account all the various costs involved in the pipeline project and an adequate profit for Iran. It is expected that the consultant's report should be completed within two weeks, the sources said.

Iran, which holds the world's second biggest natural gas reserves after Russia, has sternly rejected India's previous offer to pay a gas price of $ 4.2 per million British thermal units (BTS). Iran initially was demanding a price of $ 8.0 per mm BTU and said that the country was unlikely to receive that price, Iran has proposed that the gas price be calculated by using the liquefied natural gas monthly index used in Japan, the world's biggest LNG importer, the source said.

India was anxious for the gas because of its growing use by industry, which uses gas as a feedstock and expected use from power plant. It is also reported that India and Pakistan have urged the Iranian government to help work out some feasibility and fair gas price formula for the proposed $ 7 billion IPI gas pipeline project, the source added. It may be recalled that Pakistani interest in the proposed pipeline grew when India started negotiations with Iran for importing gas and also discussed getting the commodity through gas pipeline running through Pakistani territory, he informed.

However, Iran-India gas pipeline project as expected ran into political snags. India was apprehensive about the safety and security of getting uninterrupted flow of gas through such a route and now has started trusting its neighbouring country in this connection, the source believed.

The IPI gas pipeline project between the three countries is known as a necessity for both India and Pakistan due to their increasing fuel demand and persistent high oil price in the international market, the sources concluded. It may be recalled that officials from Iran, India and Pakistan began talks on 14th March in Tehran for the export of Iranian natural gas to South Asia. The main subject of the talks is the framework of the project and the prices of gas.

In case of an agreement, a memorandum was written and submitted to the oil ministers of these countries. The 2600-kilometer (1600 mile) pipeline estimated to cost more than seven billion dollar, was first proposed in 1994 but progress has been slowed by tensions between the nuclear-armed rivals and neighbors India and Pakistan.

The Chef Executive of Sui Northern Gas Pipeline (SNGPL) Mr. Rashid Lone while talking to newsmen in Lahore last week said that IPI gas pipeline project was ready to kick off. "The project is all set to be finalized within the next three months," he added.

He said that the pipeline project is only awaiting the finalization of unanimous price mechanism system among the three stakeholders following the fixing of all operational and technical matters, he said while addressing a press conference at SNGPL head office. He said that the implementation of the said gas pipeline project was on top priority, adding, those who were talking about abandoning the project were mischief mongers. "We are not getting influenced by any power," he said and hoped that if there were some political obstacles in the materialization of the project, these would be ironed out amicably. He said that as soon as all the stakeholders would agree to decide a price mechanism, Pakistan government might hold dialogue with international donors to seek financial assistance.

It is learnt by the reliable sources that the price suggested by the experts was 4.5 to 5.5 dollar per square feet while Iran had offered 8 dollar per square feet. Pakistan, however, did not agree on this price. Sources said that Iran is ready to fix the gas price as 6 dollar per square foot, however, that price is only for Pakistan and Iran could make an increase for India. SNGPL's managing director said that around 1,100 km gas pipeline would run through Iranian territory while 750 km pipeline would be laid in Pakistan area in the Iran-Pakistan-India gas pipeline project.