Iran, Pakistan Agree to Extend Pipeline Project Deadline

Iran, Pakistan Agree to Extend Pipeline Project Deadline Iran, Pakistan Agree to Extend Pipeline Project Deadline

Iran and Pakistan have agreed on a two-year extension for completion of Iran-Pakistan (IP) gas pipeline project, a Pakistani news agency reported.

Official sources told Business Recorder on Thursday that Iran agreed to an extension after Pakistan faced difficulties regarding construction of pipeline on its own side of the border. Islamabad has also said Tehran has agreed to suspend the penalty clause of the agreement. According to the penalty clause, Pakistan shall have to pay $2-3 million per day to Iran as of January 1, 2015 if it fails to meet the pipeline construction deadline.  

The deadline of the IP gas pipeline project was December 31, 2014 and due to mutual agreement Iran has not imposed any penalty on Pakistan, the officials said. "Now both the countries have decided to complete gas pipeline project by the end of 2016 or in the beginning of 2017," the official noted.

"Next month, Pakistan plans to start construction work on 700-kilometer-long Gwadar-Nawabshah Liquefied Natural Gas (LNG) project, which would require an extension of only 70 KM to connect with the Iranian side of the pipeline."

Officials in Pakistan are optimistic about the success of nuclear talks between Iran and the P5+1, as the two sides have agreed to resume talks next Monday after announcing "positive" progress in the recent two-day talks between US Secretary of State John Kerry and his Iranian counterpart Mohammad Javad Zarif in Geneva. "We hope it will pave the way for this project [IP gas pipeline] if there is progress in the talks between Iran and P5+1 representatives," said a senior Pakistani Foreign Office official.

To complete the construction of Gwadar-Nawabshah LNG pipeline Pakistan on government to government basis a contract has been awarded to Chinese oil/gas company China Petroleum Pipeline Bureau (CPP). Not only will the Chinese company lay the pipeline but it will also build an LNG terminal. The total cost of the LNG pipeline and terminal is estimated at $2.5 billion.

Initially the terminal will have a capacity to handle up to 500 million cubic feet per day (mmcf/d) of LNG, and later the capacity of the terminal will be expanded to one bcf/d," the official maintained.

Officials said Prime Minister Nawaz Sharif during his last visit to China, signed an agreement to lay the Gwadar-Nawabshah LNG pipeline, which as Islamabad plans could be extended to transport gas from Iran under the Iran-Pakistan gas pipeline project. The official also said that the top officials of China and Pakistan expressed hope that sanctions against Iran will be lifted and pave the way for completion of IP gas pipeline project.