A Pakistani delegation comprising the managing director of Inter-State Gas Systems, Mubeen Saulat, left for Tehran on Monday to hold talks with Iranian authorities on the $7.6 billion Iran-Pakistan (IP) gas pipeline project which has repeatedly hit snags since the deal was signed during the previous PPP-led government.
According to the gas sales purchase agreement, Pakistan was to commission the project on December 2014 but was unable to start construction work on its portion of the pipeline due to threats of US sanctions.
“Now, Pakistani authorities will put forward alternative plans to materialise the project while seeking an extension in the deadline for the first flow of gas from Tehran to avoid penalties,” an official told The Express Tribune. Under the deal, Pakistan may face a per day penalty of $3 million if it fails to implement the project by Dec 2014.
The Economic Coordination Committee (ECC) recently approved laying of an LNG pipeline from Gwadar to Nawabshah and setting up of an LNG terminal at Gwadar port. Officials say Iranian authorities would be asked to wait till the lifting of US sanctions on Tehran and Pakistan would lay the pipeline meanwhile.
Under the first proposal, Pakistan would lay a 60-kilometre-long pipeline to connect with the Iranian pipeline if the US sanctions are lifted.
According to the second proposal, Pakistani authorities would offer an alternative plan of gas import to Iranian authorities by converting natural gas into LNG, a move that will lead to shelving of the IP project.
Under this plan, Iran would convert natural gas into LNG and then export it to Pakistan by using the terminal facility of Oman which has already signed a deal with Iran for the purchase of around $60 billion worth of natural gas over the next 25 years. Around 50% of the total amount of the gas exported to Oman would be delivered to Japan, South Korea, and especially India.
“We may also use Oman’s LNG terminal facility to import gas from Iran,” a Pakistani source said.
According to officials, Iran has also conveyed to Pakistan that it has some proposals to implement the IP project amid US and EU sanctions which would be discussed in Tuesday’s meeting in Tehran.
The United States has been pushing Pakistan to import LNG and shelve the IP project. Iran has conducted several training courses for Pakistani officials relating to the LNG import and providing technical assistance to import LNG from Qatar and some other parties through a bidding process by Pakistan State Oil.
Iran had reached a historic deal with the United States and five other world powers in November last year accepting strict checks on its nuclear program in exchange for partial relief from sanctions. Islamabad wants Tehran to also take up issue of IP project with Washington under the deal.
Published in The Express Tribune, October 28th, 2014.
COMMENTS (9)
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@Sher: India continues to buy oil from Iran. Its parliament has also approved a budget for building the Chabahar port.
It shelved the deal because: - the unreasonable transit rate that Pakistan sought which was not economically viable - Pakistan's unwillingness to sign penalty clause in case pipelines built by India were destroyed by terrorists in Pakistan.
Pakistan Govt. unlike Iran cannot independently setup economics and foregin policy without the dictation of foregin Powers, Finance can be arraigned but permission to go ahead may not be granted. This meeting is just to stall the Pakistan side of construction.
When the national interest is not in the heart and mind of our government this is bound to happen time and time again.Our political leaders and establishment can only make false promises to the nation and now they have employed the same tactics with other nations too. The nation is going to face huge embarrassment and a great loss to national exchequer. The present government was sleeping on the issue for last eighteen months and just two months before the deadline is offering non practical and face saving solutions to Iran which in any case are not worth implementing.
Pakistans desperate manouvering to escape mutually agreed penalties ++++++++++++++++++++++++++++++++++++++++ Overlooking the fact that Iran made a huge investment and completed its part of the Pipeline.....that too 2 months prior to the commencement of the penalties Blame it on IK.
Great... We signed an agreement while Iran was under US sanctions and 2 years later - 2 months before the agreed deadline - we are asking for the project to be put on hold and consider other options and wait for US to lift sanctions.... Compare that with India made a decision against IPI pipeline and has secured alternative supply options and one of the biggest gas importer already.
The IP agreement was signed by Zardari in March 2013 long after the sanctuons on Oran had come in to play. At that time there was a lt of chaet thunping and ghairat about we will build the pipeline AT ANY COST. Under the cirsumstances, to use the sanctuons as a basis of getting out of the penalty that Pakistan would owe for ot having completed the pipeline in the imeframe it had committed is thing more or less than breach of contract.
There is no issue of sanctions as many countries are dealing with Iran; Turkey gets gas from Iran & buys about 30 million cubic metres of gas per day.
PMLN has started option of LNG which is double the rate of IP project. LNG has drwback has it requires additional cost of plant installation to convert from liquid to gas form. This is indeed a bad project (LPG) for a developing country like paksitan
Until then... please seal one end of the pipeline. You don't want the bad guys to know that they have a ready-made tunnel. This is Pakistan we are talking about. This was conceivable one of the reasons that India refused to join the IPI. You will never know what will come next through the pipeline. :-)