IP gas pipeline project ‘nearly dead’ due to sanctions: report

The troubled multi-billion-dollar gas pipeline project between Pakistan and Iran is virtually dead as Pakistan’s economic managers have decided to stall the $7.5 billion project until the international community lifts sanctions against the Islamic Republic, according to a report in the local media.

According to the report, the Pakistani government believes that the project couldn’t be implemented under the present geopolitical situation because of Tehran’s association with the project.

The government decided the border phase of the project would only be implemented once international sanctions were lifted and Pakistan was in a position to construct and connect its portion of the pipeline with the Iranian pipeline with no concern for sanctions on its companies for receiving gas or making gas payments to Iran.

The decision-makers in a meeting of the Economic Coordination Committee (ECC) held on October 2 had noted that since phase-II would comprise construction of an approximately 80-kilometre long pipeline, it would require little time for completion, sources said.

The meeting was informed that a gas sales and purchase agreement (GSPA) between the Inter-State Gas Systems Pvt Limited (ISGS) from Pakistan and the National Iranian Oil Company (NIOC) was signed in June 2009.

Despite Pakistan’s best efforts, the project repeatedly hit snags due to the international sanctions imposed on the Islamic Republic for its controversial nuclear programme. Iran’s association with the project and possible risk of violating sanctions has scared away potential financiers, reputable international suppliers of crucial equipment and contractors.

Pakistan’s economic managers were also informed about Iran’s unilateral withdrawal from the government-to-government cooperation agreement and the $500 million financing for the construction of Pakistan’s portion of the pipeline. This had created a force majeure situation for Islamabad and accordingly the matter was taken up with Tehran as per the provisions of the GSPA.

It was also stated that the Gwadar-Nawabshah LNG terminal and pipeline project had been planned keeping in view any future developments in the IP project.

The pipeline would meet growing needs of the energy-starved Pakistan and could also be utilised to link up to the Iranian border in future.

“As work of pipeline route has already been done for the IP project, it has been envisaged that the same specifications should be utilised for this project,” an official of the Ministry of Petroleum and Natural Resources said, adding that this project would provide capacity of up to 500mmcfd of LNG-based gas supply which could be used to cater for the needs of public and private sectors.

It shall also serve as a means to realise the objectives of the IP project for the import of substantial qualities of urgently needed natural gas within three years. After detailed deliberations, the ECC approved in principle the Gwadar-Nawabshah LNG terminal and pipeline.

Officials of the Ministry of Petroleum and Natural Resources said that proposals for this purpose had been shared with Iranian authorities who would respond after discussing with their high-ups.