Tehran Reportedly Ends IP Pipeline Cooperation

Tehran Reportedly Ends IP Pipeline Cooperation
Tehran Reportedly Ends IP Pipeline Cooperation

Iran has unilaterally ended the government-to-government cooperation agreement with Pakistan, a measure which makes the Iran-Pakistan (IP) pipeline project unfeasible.

The Ministry of Petroleum and Natural Resources in Islamabad on October 2 revealed to the Economic Coordination Committee (ECC) that Iran has unilaterally ended cooperation agreement with Pakistan and is not even prepared to offer $500 million for the construction of the long-awaited IP gas pipeline project, Daily Times claimed referring to copies of official documents.

Pursuant to an agreement signed earlier between the two countries for supply of natural gas to Pakistan, the country had been made bound to purchase gas from Iran till December 2014. The agreement stipulates that if gas export to Pakistan does not commence by December 31, Pakistan must pay Iran $200 million per month.

It has been reported that Inter State Gas System (ISGS), a company mandated by the government of Pakistan to develop natural gas import projects, has issued a notice to Iran regarding IP gas pipeline project. The ISGS has claimed force majeure on the basis of circumstances beyond Pakistan’s control, namely international sanctions on Iran, which have made it unfeasible for Pakistan to work on the said gas import project.

However, on Oct 2, the ECC had approved ‘fast track’ construction of 710km Gwadar to Nawabshah gas pipeline and LNG terminal at Gwadar port as an alternate plan to facilitate Iran-Pakistan pipeline and transport liquefied natural gas (LNG).The ISGS has been authorized to execute the implementation of the project. The ministry of petroleum and natural resources was commissioned to finalize the funding plan preferably on government-to-government basis or build-operate-transfer or build-own-operate basis.

Pakistani Finance Minister Mohammad Ishaq Dar while attending World Bank and International Monetary Fund (IMF) meetings in Washington informed his Iranian counterpart, Ali Tayyebnia, that the government had approved the 700-kilometer section of the pipeline from Gwadar to Nawabshah and that Pakistan was considering various alternatives to meet the financial requirements.

The construction of Gwadar to Nawabshah pipeline would suggest Pakistan’s seriousness to implement the pipeline project that Pakistan required at all costs to link Gwadar with the gas system in Sindh and the rest of the country. This would leave about 70km of pipeline segment between Gwadar and Iranian border which could be laid immediately whenever international sanctions are lifted against Tehran. The government had decided to lay the pipeline from Gwadar to Nawabshah in Sindh “as an alternative plan” in view of international sanctions working against Iran-Pakistan Gas Pipeline, according to Petroleum Minister Shahid Khaqan Abbasi.

Companies from China, Japan, Russia and Turkey have shown interest to participate in this project.