IP gas line project: Pakistan starts working to materialise 80-km pipeline

ISLAMABAD: Prior to the visit of Iranian President Ebrahim Raisi likely on April 22, the authorities concerned have started working to materialise 80-km pipeline from Gwadar to a point where it will get connected with the pipeline in Iranian territory.

A senior official of the Energy Ministry told The News Inter State Gas Company (ISGS) has issued tenders, asking consultants for revalidation of survey and Front-End Engineering Design (FEED). The survey was conducted several decades ago.

The official said laying down 80-km pipeline is necessary to avoid arbitration in France and an expected penalty of $18 billion. The project was to be completed by December 31, 2014, and it was to become operational from January 1, 2015. Iran and Pakistan signed the Gas Sales and Purchase Agreement (GSPA) in June 2009 and Operations Agreement in March 2010, he said. The project has been facing delays since 2014.

The official said, “Pakistan received the last notice in early January 2024. Iran had asked Pakistan in Nov-Dec 2022 in its second notice to construct a portion of gas line project in its territory till Feb-March 2024 or be ready to pay a penalty of $18 billion.”

Before that, Tehran sent a notice to Islamabad in Feb 2019 to move an arbitration court for not laying down the pipeline in Pakistan territory in the stipulated period under the IP gas line project. It threatened to invoke the penalty clause of Gas Sales Purchase Agreement (GSPA), he said. The GSPA was signed in 2009 for 25 years but the project could not take shape, he added.

Once the revalidation of survey and FEED is completed, the official said, the process of land acquisition would kick off. After that, the Engineering, Procurement and Construction (EPC) contract will be awarded.

The official said revalidation of early survey and FEED is necessary, as under the new scenario the government will build an 80-km pipeline part, which is a smaller part of the IP gas line with two compressors from end to end (one at border and other one at Gwadar). The whole IP gas line was to have a take-off of 750mmcfd gas for 25 years, but the 80-km part of pipelines would absorb 100mmcfd initially.

“The project would be completed in 24 months at the cost of Rs44 billion. The authorities in Petroleum Division would seek a substantial amount for the project in the budget 2024-25 from PSDP, as Finance Ministry may not be able to release the required amount from the head of Gas Infrastructure Development Cess (GIDC)”, he said.

The government has so far collected Rs350 billion from various companies under GIDC and the remaining 400 bn is yet to be recovered. There are reports from Finance Ministry it has spent GIDC amount of Rs350 billion for budget financing.