ISLAMABAD - Talks on setting new timeframe for the completion of much-awaited Iran-Pakistan (IP) gas pipeline project are starting today in Tehran.
A Pakistani delegation that flew to Tehran on Sunday would hold talks with Iranian authorities to set a new mutually agreed timeframe for the project. Under the Gas Sales Purchase Agreement (GSPA) signed earlier with Iran by the outgoing PPP government in 2009, the first flow of gas to Pakistan should have started by Dec 31, 2014.
The two countries are responsible for completion of the pipeline within their territories. Failure on part of a party entails penalties equivalent to the price of daily gas quantities that is around $3 million for every day’s delay in completion of the project. Iran can also claim billions of dollars in compensation for any breach of contract.
Well-informed sources told The Nation that following the approval of a board of Inter State Gas Company (ISGC), a delegation of ministry of petroleum and natural resources comprising the officials of ISGC flew to Iran on Sunday to hold negotiations with Iranian authorities, particularly the National Iranian Gas Exports Company.
The Pakistani delegation would ask Iran to set a new timeframe for completion of the project. It would make all out efforts to convince Iranian government regarding Pakistan’s point of view on the issue and try to get extension for completing the work on the gasline project. The delegation would also seek exemption from the already set heavy penalty in case of delay in completion of project by the previously set deadline.
“Both the countries after resolving minor differences bilaterally would decide to set a new realistic timeframe for the construction of the much-needed energy resource to Pakistan,” a senior official at petroleum ministry said, adding, “both countries should realise that their gas pipeline will not come on stream by December 2014.”
The sources also told that a board meeting of ISGC was held here on January 30, 2014 under the chairmanship of secretary petroleum. The board reached on a consensus that Pakistan should continue work on IP gas pipeline project. The board also granted permission to the ISGC and mandated it to hold negotiations with Iran for a new timeline of the multi billion project to avoid heavy penalty.
Iran had laid pipeline on its side by investing $2 billion but Pakistan informed the Iranian side that the US sanctions against Iran had affected the project and no financier or contractor was ready to participate in the project for laying the pipeline on its side. Pakistan had invited bids but no company participated in it. Iran committed two tranches of $250 million each to lay Pakistan’s portion of the pipeline but recently it declined to provide financing, saying it was ready to provide gas but would not provide funds for Pakistani portion of the project.
Incumbent PML-N government has repeatedly dispelled the impression that it might abandon the $1.5 billion project due to pressure from the US, Saudi Arabia and some other oil-rich states. Prime Minister Nawaz Sharif clearly conveyed to the US Secretary of State John Kerry when he visited Pakistan in August 2013 that his government would go ahead with the project.
Nawaz in September last year also assured Iranian President Hassan Rouhani during their meeting on the sidelines of the UN General Assembly session that Pakistan has every intention of going ahead with the project.
Reiterating Pakistan’s stance to complete the pipeline project at any cost, Petroleum Minister Shahid Khakan Abbasi in December told a press conference that a bilateral working group of Iran and Pakistan had been formed which would formulate the modalities within two months to materialise the project on fast track basis and resolve minor differences involving the project. This group was asked to also see the matter pertaining to extending the December 2014 deadline and help the two countries to review the tariff of gas to be supplied to Pakistan.