ISLAMABAD - The IPI project is in the doldrums. Iran has conveyed to Pakistan that it wants to revise the gas pricing formula after every year instead of previously agreement of revision of gas prices every two years. After the new conditions from Iran, Pakistan has asked Iran to review its new conditions, including the pricing formula for the gas being provided to Pakistan under Iran-Pakistan-India (IPI) project and emphasised the need that Iran should accept the previously agreed upon gas price formula for this $7.4 billion project. Referring to the proposed increase in the gas price, sources in the Petroleum Ministry said that Pakistan has written to the Iranian government seeking clarification about the new pricing formula and the proposed visit of Pakistan's delegation to Iran in the third week of November has been cancelled so far. Special Representative of the Ministry of Petroleum, Iran wrote a letter to Pakistan on November 9, 2008 in which Iran invited Pakistan's delegation to visit Iran either on November 17 or 24 to sign the agreed issues on this project. Pakistan and Iran previously finalized the draft of the Gas Sales Purchase Agreement (GSPA) and the two sides agreed to link the gas tariff with the Japan Crude Cocktail price. Pakistan has again sent a proposal to Iran to accept the previous agreed gas price of 6.8 dollars per Million British Thermal Unit (MBTU). Both the countries started this price at 3.13 dollars per MBTU and during a meeting between Pakistan's delegation in its visit to Iran in September agreed to gas price at the rate of 6.8 dollars per MBTU but now Iran has proposed a new price of 10.80 dollars per MBTU. Pakistan has also asked Iran to review this price as it is not affordable and it will increase the gas price for the consumers in Pakistan manifold. Under the proposed agreement, IPI gas pipeline would bring natural gas from Iran's South Pars gas field in the Persian Gulf to Pakistan and India. In phase I, about 2.10 BCFD gas would be supplied that include 1.05 BCFD for Pakistan and 1.05 BCFD for India. Under phase II, about 3.20 BCFD additional gas would be supplied to Pakistan and India and again both the countries would have fifty-fifty share. The target for commissioning of the phase I is 2013-14 while for the second phase, which involves a separate parallel gas pipelines, has a targeted commission for 2017-18. With the completion of the project, it could support to generate 5,000 MW power generation capacity in Pakistan. Both Pakistan and Iran initiated a Gas Sale Purchase Agreement (GSPA) in December 2007 and it has to signed in February 2008 but Iran reopened five issues to discuss before signing it. The five issues were: transit of natural gas to India, contract price formula, stand by letter of credit, price revision and force majeure and excusing events. Pakistan's government held talks with Iranian officials on many times with a review to resolve these issues and finally received changes proposed by Iran in the GSPA. A delegation led by Secretary Petroleum visited Iran in September this year and out of five reopened issues, four were settled with Iran. The four issues settled between the two governments include an understanding that delivery of gas for India by Iran will be at the Pakistan India border and in exchange Most Favoured Nation (MFN) clause from Pakistan from Iran would be incorporated in the GSPA. The amendment proposed by Iran in the letter of credit document was agreed to be incorporated as long as it is in the line with the international banking practices. The amendment proposed by Iran in the force majeure clause was incorporated with some amendments by replacing the proposed word of "Act of War" with "War between the states". On the Iranian request to remove the upper ceiling of US $70 per barrel in "S" curve of JCC crude oil price was agreed. The only outstanding issue reopened by Iran is the price of gas and its revision clause of GSPA. The Iranian side has informed that the parties should have the right to request one additional price revision at any time during the period of one year prior to the commencement date, on the same basis as stipulated in clause 6.34 in the GSPA. The Iranian side has further informed Pakistan that as per policy direction from their government, the delivered price of gas should be based upon the weighted average price of gas being delivered by Iran to its other buyers and accordingly proposed to provide the proposal along with the supporting calculations. India has more or less agreed to give Pakistan a transit fee of $200 million per year, which is equivalent to $0.60 per million British thermal unit for allowing passage of the pipeline through that country. According to the proposed project, the pipeline will begin from Iran's Assalouyeh Energy Zone in the south and stretch over 1,100 km through Iran. In Pakistan, it will pass through Baluchistan and Sindh but officials now say the route may be changed if China agrees to the project.   The gas will be supplied from the South Pars field. The initial capacity of the pipeline will be 22 billion cubic meter of natural gas per annum, which is expected to be later raised to 55 billion cubic meter. Presently Pakistan is producing 3,309 mmcfd against the demand of 4,808 mmcfd, which will be increased to 6,889 mmcfd in 2020 against the production of 1,349 mmcfd creating a shortfall of 5,540 mmcfd and it will be even after the total exploration and receiving the gas from Iran under IPI and from Turkmenistan under the project TAPI project.