Pakistan abandons $2b Gwadar-Nawabshah gas pipeline project

ISLAMABAD: In the wake of growing tensions between Saudi Arabia, GCC countries and Qatar, the Pakistani government has abandoned the $2 billion Gwadar-Nawabshah gas pipeline project.

A key decision was taken during a high-level meeting, chaired by Prime Minister Nawaz Sharif in the first week of June when the Federal Ministry of Petroleum was directed to drop the Gwadar-Nawabshah gas pipeline project and commence work on the new Port Qasim LNG terminal in Karachi. The Federal government took the critical decision after the government received pressure from America.

This project was considered an alternative to the Iran-Pakistan (IP) gas pipeline keeping in view the US-led sanctions on Iran for their nuclear programme.

This decision would be an enormous setback for the Chinese who had signed an agreement in April 2015 for the laying of the Gwadar-Nawabshah gas pipeline project.

As per the agreement reached with Iran, Pakistan was supposed to start receiving gas from January 2015 and in case this agreement was not honoured, the latter would have to pay a penalty amounting to $3m daily. Under this gas-supply purchase agreement, Iran was legally allowed to sue Pakistan for not meeting its obligation but decided against it.

Ironically, this project has been shelved due to high cost only after Executive Committee of National Economic Council had done a detailed cost evaluation and given it the go ahead earlier on. Exim Bank of China would have provided funding for the project.