TheNation Monitoring Pakistan plans to borrow $300 million from local banks to build a pipeline that will carry natural gas from neighbouring Iran, easing its worst energy crisis that is curbing economic growth, reports Bloomberg. Local state-owned companies will provide about $210 million in equity for the $1.3 billion pipeline, said Mobin Saulat, acting managing director of Inter State Gas Systems Ltd., the agency responsible for the project. Pakistan may approach foreign companies including OAO Gazprom, International Petroleum Investment Co. and China National Petroleum Corp. for the rest of the financing, he said. Weve done the market testing to see the appetite among local banks, Saulat said. The signal weve got is that around $300 million can be raised from a local consortium. Domestic funding is crucial because US and international sanctions against Iran, imposed over concerns that the country is trying to build nuclear weapons, are likely to block Western and multilateral funding. Pakistan is pursuing the Iranian gas deal as its ties with the U.S. have come under strain this year following a seven-week standoff over Pakistans detention of an American CIA contractor who had killed two Pakistanis, and the May assault by American forces that killed al-Qaeda leader Osama bin Laden in the Pakistani town of Abbottabad. The biggest question mark on this project is still the availability of funding, said Hasan-Askari Rizvi, a Lahore- based analyst. There are signs that the Americans are softening their opposition to this project given the severity of the energy crisis in Pakistan. Fuel shortages in Pakistan have forced the government to ration supplies, cutting power for as much as half the day in major cities and triggering street protests against the government of Prime Minister Yousuf Raza Gilani. Inter State Gas, based in Islamabad, is responsible for completion of the pipeline by 2014, a deadline agreed on by the two countries last year after political and security concerns delayed the project by a decade. Under an accord signed in June 2010, 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 volumes may rise to 30 million cubic meters a day. The US last year tightened its sanctions, which target Irans energy sector, and the administration of President Barack Obama has publicly supported an alternative gas pipeline project, from Turkmenistan to Afghanistan, Pakistan and India, that would bypass Iran. Economic sanctions by the United Nations, the EU and the U.S. over Irans nuclear program have discouraged investment in the Persian Gulf country. Royal Dutch Shell Plc, Europes biggest oil company, and Repsol YPF SA of Spain pulled out of a project in Irans South Pars gas field last year. China National Petroleum, known as CNPC, replaced Total SA at the field in 2009 after the French company postponed an investment citing Irans strained relations with the West. So far, the sanctions primarily focus on development of the fields, Saulat said. Iran is currently engaged in exporting gas to Turkey through a pipeline and importing gas from Turkmenistan. There was never a pipeline-specific sanction. State-owned companies that may collectively buy a majority stake in the planned pipeline include Government Holdings Ltd., Sui Southern Gas Co. and Sui Northern Gas Pipeline (SNGP), he said. Pakistan is seeking $900 million in debt and $400 million in equity funding for the project. Gazprom, the Russian gas-export monopoly, International Petroleum Investment, an arm of the Abu Dhabi government, and CNPC have all shown interest in the venture, Saulat said. Gazprom may fund and help build the 780-kilometer (485-mile) pipeline, he said, declining to elaborate. Liu Weijiang, Beijing-based director of CNPCs international department, didnt answer three calls to his office and mobile phones. Calls and an e-mail to an IPIC spokesman yesterday after business hours in the Ramadan holy month werent immediately returned. A press officer at Gazprom, who couldnt be identified in line with company policy, declined to say whether the company is interested in the project. Pakistans 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 shortage has forced the government to ration supplies to cars that run on compressed natural gas, while the biggest cities have faced blackouts for as long as 12 hours a day. Energy Mix : Last year, 53 percent of Pakistans energy came from natural gas, 30 percent from oil and the rest from coal, nuclear and hydropower, according to data from BP Plc. Pakistan produced 39.5 billion cubic meters of gas in 2010, or 3.8 billion cubic feet a day, according to BP. Inter State Gas invited banks last month to help arrange the funding and plans to seek bids for construction next month, Saulat said. 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 Qatars North Field, is the largest known gas deposit in the world. We are doing things in parallel for the expeditious completion of this project, Saulat said. There is a huge shortfall and we need to work on many options to meet that growing demand.