Iranian President Ebrahim Raisi is slated to visit Pakistan on April 22, coinciding with the initiation of the Pakistan-Iran Gas Pipeline Project by the Ministry of Energy. Efforts are underway to materialize an 80-kilometer pipeline from Gwadar to a connection point in Iranian territory.
The Pakistan-Iran Gas Pipeline Project, estimated to be completed within 24 months at a cost of Rs44 billion, is expected to secure a significant allocation from the Petroleum Division in the 2024-25 budget under the Public Sector Development Programme (PSDP). The Finance Ministry is unlikely to provide necessary funds from the Gas Infrastructure Development Cess (GIDC) head.
A senior official from the Energy Ministry revealed that the Inter-State Gas Company (ISGS) has initiated tender processes to validate surveys and conduct Front-End Engineering Design (FEED) by consultants, a process long delayed.
This development unfolds amid explicit opposition from the United States to the bilateral project, accompanied by warnings of potential sanctions. Despite facing nearly a decade-long delay since its original completion target in December 2014, followed by operationalization in January 2015, the project persists.
While Pakistan cites US sanctions on Iran as the reason for project delays, Tehran contends that these sanctions are unwarranted. In January, Tehran issued a final notice to Pakistan for completing its pipeline section by February-March 2024 or facing an $18 billion penalty under the penalty clause of the Gas Sales Purchase Agreement (GSPA) for the 781-kilometer project.
The urgency to lay the 80-kilometer pipeline section stems from the potential arbitration in France, which could render Pakistan liable for the aforementioned penalty.
Initially, the 80-kilometer pipeline segment is anticipated to handle 100 million cubic feet per day (mmcfd) of gas, compared to the projected 750 mmcfd for the project’s 25-year duration. Subsequent steps involve land acquisition and awarding Engineering, Procurement, and Construction (EPC) contracts.
