Islamabad Sends Mixed Signals on IP Gas Pipeline

Iranian and Pakistani officials are still hopeful that a long-pending gas supply project between the two nations will see the light of day despite years of financial constraints and procrastination by Islamabad.

In a statement on Wednesday, Hamidreza Araqi, the chief executive of National Iranian Gas Co. blamed the sanctions on Tehran and financial constraints of Pakistan for the delay in completion of so-called Iran-Pakistan Gas Pipeline.

"We are ready to begin gas exports to Pakistan whenever they are ready," Araqi was quoted as saying by IRNA.

Mobin Saulat, head of Pakistan's state-owned Inter State Gas Systems, told Pakistani daily the Nation on Tuesday that the pipeline was given a back seat due to the international restrictions on conducting business with Iran due to the dispute over its nuclear program.

Most international sanctions were lifted nine months ago following a historic deal with the world powers in July 2015 on placing curbs on Tehran's nuclear activities.

Pakistan has started work on a separate pipeline close to the IP gas pipeline near the border with Iran which will carry gas from the port city of Gwadar in its Balochistan Province to Nawabshah 270 kilometers north of Karachi.

Saulat added that "after the completion of Gwadar-Nawabshah Pipeline, only 70 kilometers of the pipeline segment between Gwadar and Iranian border would be left and could be constructed at a cost of $200 million".

The 700-kilometer pipeline is expected to be completed in two years, largely via Chinese finance. It will allow Pakistan to meet much of its gas demand from a new LNG loading port in Gwadar.

Some officials and analysts say that low LNG prices in the international market have diverted Pakistan's attention from the IP gas pipeline project.

In February, Pakistan sealed a deal with Qatar to buy LNG from the Arab state for 15 years, casting further doubt on its intention to complete the long-delayed IP pipeline project.

The idea of a pipeline stretching from Iran's gas-rich southern regions to Pakistan and from there to India goes back to the 1950s. But the first real move was taken when the three sides signed a preliminary agreement in 1999 on building a gas pipeline.

Since then, the project has hit multiple financial and political hurdles. In 2009, India withdrew from the project over pricing and security issues, and after signing a civilian nuclear deal with the United States in 2008.

The pipeline's construction was to commence in 2012 and be completed in two years. But that too was postponed after tighter restrictions were imposed on Tehran.