Pakistan approves construction of Iran-Pakistan gas pipeline amid fear of penalty

Pakistan approves construction of Iran-Pakistan gas pipeline amid fear of penalty

NEW DELHI: The Pakistan government has given approval for the construction work on its section of the Iran-Pakistan (IP) gas pipeline.

The approval for the initial phase of the 80-km segment within Pakistan was granted by the Cabinet Committee on Energy (CCoE) of the interim government, just days before the new government takes office after the February 8 elections.

“The Pakistan government has approved the start of construction work on its segment of the Iran-Pakistan (IP) gas pipeline,” said an official statement.

The project is expected to begin from the Pakistan-Iran border and extend up to Gwadar, a port city in Balochistan province, in the first phase.

“All the concerned divisions gave a positive nod to move ahead with the project to ensure gas supplies to the people of Pakistan, thereby addressing the increasing energy needs of the country,” the statement stated.

Pakistan’s Interstate Gas Systems (Pvt) Ltd will be responsible for executing the project, which will be financed through the Gas Infrastructure Development Cess (GIDC).

According to several reports, Pakistan has been compelled to initiate the work due to the fear of a potential 18 billion US dollar penalty for failing to complete the project on time.

Iran has granted a 180-day extension until September 2024, in order to avoid legal action in international courts. Experts warn that diplomatic relations between Pakistan and Iran could be strained if Iran pursues legal action to protect its rights regarding the pipeline project.

Initially conceived as an India-Pakistan-Iran gas pipeline, the project later became a bilateral venture between Pakistan and Iran after India withdrew from it.

Despite the US-imposed sanctions on Iran over its nuclear program, Pakistan has decided to proceed with the construction of the IP gas pipeline within its borders as a commitment to Tehran.

In March 2013, the groundbreaking ceremony for the project was held near Iran’s port city of Chabahar, with an estimated cost of 7.5 billion US dollars at that time.

Both countries signed a Gas Sales Purchase Agreement (GSPA), which bound Pakistan to initiate construction on the IP project. However, Pakistan failed to commence construction on its side, primarily due to pressure from the US and sanctions on Iran, despite Iran claiming to have completed construction on its side.

Last year, the country’s Public Accounts Committee was informed that Pakistan would face a staggering penalty of 18 billion if it did not proceed with the Iran-Pakistan Gas Pipeline project.

( with input from agency)

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