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Thursday April 18, 2024

Pakistan to ask US to waive curbs on Iran gas pipeline

The remarks from Malik came amid Pakistan’s efforts to navigate its energy needs while managing international sanctions and domestic challenges

By Israr Khan
March 26, 2024
Workers and supervisors are seen at the site of the gas pipeline between Pakistan and Iran. — AFP/File
Workers and supervisors are seen at the site of the gas pipeline between Pakistan and Iran. — AFP/File

ISLAMABAD: Pakistan is preparing to officially request a waiver from the American sanctions concerning the Pakistan-Iran gas pipeline project, with a finalised draft ready for submission to the US administration.

“We will seek exemptions from American sanctions as the Iran-Pakistan gas project cannot bear the burden of sanctions,” Petroleum Minister Musadik Malik said Monday in an unofficial conversation with the media.

The remarks from Malik came amid Pakistan’s efforts to navigate its energy needs while managing international sanctions and domestic challenges.

The caretaker government had previously delayed plans to file for an exemption to American sanctions due to evolving geopolitical circumstances. This effort aims to address Pakistan’s energy requirements while ensuring compliance with contractual agreements with Iran.

“We will present Pakistan’s case comprehensively and will try to seek exemptions by presenting political and technical reasons against American sanctions. The government will also engage in extensive lobbying to obtain exemptions,” reiterated Malik. He expressed hope that construction of the project would commence soon.

It is noteworthy that the caretaker government had previously approved the construction of an 80-kilometer pipeline on Pakistani soil, with decisions regarding the Pakistan-Iran gas pipeline project made by the ministerial oversight committee.

He expressed concerns over increases in gas prices and said, “Whether the dollar price decreases or increases, requests for price hikes come from companies.”

Regarding the implementation of sales tax on petroleum products, he commented, “I am not aware of the implementation of sales tax on petroleum products.”

Malik highlighted the disparity in access to gas facilities, noting that only 25 to 27 percent of urban areas have access while more than seventy percent of the population does not. However, he emphasised that 99 percent of the population is connected to the electricity system, advocating for the supply of cheap electricity as a solution to the problem.

Discussing electricity generation, Malik cited examples of power plants demonstrating efficiency but noted the escalation in per-unit cost due to expensive RLNG (re-gasified liquefied natural gas).

Citing examples, he noted that Bhikki and Haveli Bahadur Shah power plants had demonstrated greater efficiency. However, the per unit cost of electricity escalated to Rs22-26 due to the expensive RLNG. Meanwhile, electricity generated from local gas costs Rs10-12 per unit, with some private companies producing electricity at Rs6 per unit.

He suggested that six LNG power plants could operate on local gas to produce cheap electricity and emphasised efforts to conserve gas while providing affordable electricity to the people. Malik also mentioned the import of oil through private channels from Russia and addressed the issue of circular debt in the energy sector, stating that reforms would be necessary to tackle the five trillion rupees circular debt.