Pak seeks out-of-court settlement to shelve IP gas pipeline project

Islamabad, Jan 13 (PTI) Pakistan has conveyed to Iran its intention to shelve the Iran-Pakistan (IP) gas pipeline project under an out-of-court settlement framework, while also offering to revive it if a waiver from the US sanctions is secured, a media report said on Tuesday.

The IP gas pipeline project has remained stalled since 2014 due to the US sanctions against Iran, despite Tehran granting extensions of more than a decade. Iran has also initiated legal proceedings over Pakistan’s failure to execute the project within the stipulated time frame.

Iran has agreed to extend the gas sale agreement for another 10 years in an effort to put the IP gas pipeline project back on track, The Express Tribune newspaper reported, citing sources.

Pakistan,

however, conveyed an alternative option of implementing the project only if a US sanctions waiver is obtained, it added.

“Pakistan wants the agreement extended if the US grants a sanctions waiver, along with reduced gas volumes and lower prices from Iran,” a source close to the development told the paper. Both sides have been engaged in backdoor diplomacy, and the issue was also raised with high-profile dignitaries visiting Islamabad.

Discussions with various government officials indicated that Pakistan had already informed Iran of its desire to scrap the project due to the US sanctions against Tehran.

Officials said Pakistan is also facing lower domestic gas demand, while Qatar is expected to supply 24 LNG cargoes in 2026.

“For now, Pakistan does not need additional gas because of low demand,” an official said, adding that IP gas prices were also higher than prevailing LNG prices in the country. “Pakistan is also under pressure from the US regarding the IP gas pipeline project.” Pakistan had previously sought a waiver from the US to execute the IP gas pipeline project, which Washington declined to grant.

Matthew Miller, a spokesperson for the State Department during the previous administration, had warned that the US would continue enforcing sanctions against Iran.

“And as a matter of course, we also advise anyone considering business deals with Iran to be aware of the potential ramifications of those deals,” Miller, who served under then-President Joe Biden’s administration, had said.

Iran maintains that it has completed its portion of the pipeline, while Pakistan has yet to begin construction on its side. Officials said Iran remains willing to extend the gas sale agreement for another decade, but Pakistan wants to shelve the project due to US sanctions and weak domestic demand.

Over the years, Pakistan has explored alternative options to implement the pipeline project. Under one plan, Islamabad proposed building an LNG pipeline to Gwadar, with an 80-kilometre extension to the Iran border. A Chinese company had also expressed interest in constructing the pipeline, but the project was shelved due to US sanctions.

Currently, Pakistan relies on liquefied natural gas imports from Qatar.

“This gas is meant to meet the requirements of consumers in the power sector,” an official said. However, the power sector has been unable to lift the full volume of LNG imports from Qatar, resulting in a gas glut.

To address the surplus, the government recently announced two initiatives to boost LNG consumption. Incentives have been introduced under an incremental electricity supply package to provide lower-cost power to agriculture and industrial sectors over a three-year period, enabling greater LNG utilisation in the power sector.

The government has also lifted a decade-long ban on new gas connections for domestic and commercial consumers. New consumers will receive gas priced at LNG rates to “enhance LNG consumption and address the issue of surplus gas”, according to the paper.

The project was originally proposed in 1994 as the Iran-Pakistan-India (IPI) pipeline. However, India withdrew in 2008 due to US sanctions. It coincided with India’s signing of a civil nuclear deal with the US in 2008.

The withdrawal of India led the project to evolve into a bilateral venture between Pakistan and Iran, but it was doubted to be completed in the absence of India. PTI SH  ZH ZH