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April 9, 2014

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Iran almost abandons IP gas pipeline project

Iran almost abandons IP gas pipeline project
ISLAMABAD: Tehran is all set to punish Islamabad for its failure to lay down the 781-kilometer-long pipeline in Pakistan’s territory under the Iran-Pakistan (IP) gas line by initiating a new project of Iran-Oman-India (IOI) gas pipeline, a senior official at the Ministry of Petroleum and Natural Resources told The News.
Indian Foreign Minister Salman Khurshid, Omani Minister for Foreign Affairs Yousuf bin Alawi bin Abdullah and Iranian Foreign Minister Javad Zarif met in New Delhi on February 28, 2014 and discussed the project of deep sea IOI gas line at estimated cost of $4-5 billion by putting aside Pakistan.
However, when contacted, Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi said: “We have no news of any such replacement of project.” He explained that the IP project has contractual obligation on both sides, which can be implemented once the sanctions are over.
Mobin Saulat, the Managing Director of Inter-State Gas System (ISGS), when contacted, also expressed ignorance about the development.The top official said that Iran has taken this step after Pakistan failed to fulfill its obligations on time. Under the agreement, Pakistan is bound to lay down the 781-kilometre pipeline from MP250, a point on the Pak-Iran border to Nawabshah to meet the deadline of December 2014, but on the ground there is no activity for laying down the infrastructure to this effect.
Under the agreement, Pakistan was to get 750 million cubic feet of gas per day (mcfd) from January 1, 2015. Later, the gas supply from Iran was to be increased to 1 billion cubic feet gas per day (bcfd). Now the import of gas under the IP project seems a non-starter.If Pakistan fails to meet its obligation, then after the deadline, it will have to pay to Iran the huge penalty of almost $200 million a month.
This alarming and shocking development took place after Pakistan got ‘mysterious’ huge amount of $1.5 billion under the head of Pakistan Development Fund from the Kingdom of Saudi Arabia. The official apprehended saying that this move also came in the backdrop of IP pipeline running into troubles on various counts, including Tehran going back on a promised loan of $500 million to Pakistan.
However, the Nawaz government says that it is unable to generate the required $1.8 billion funding to materialise the project because of the US and EU sanctions on Iran and whenever the curbs are removed, Pakistan will complete its obligation in 18 months.
Pakistan has requested to link the completion of the project with the lifting of the US and EU sanctions and has also asked Iran not to invoke the penalty clause that would be valid after the deadline of December 14, 2014 is over.
Iran says that Pakistan inked the gas sales purchase agreement (GSPA) amid the sanctions and heads of both the countries also jointly inaugurated the project when sanctions were very much there, but when the new government came in, it has virtually abandoned the project under the pretext of sanctions. This has irked the Iranian authorities owing to which they have also decided to replace the IP project with IOI gas line.
The most alarming aspect, the official disclosed, of the new venture is that the Iran will provide the gas to India under IOI gas line project from the South Paras oil and gas field in the Iranian Gulf from where the gas was earlier supposed to provide to Pakistan under IP gas line project.
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