Iran minister says Pakistan gas contract probably dead

DUBAI: Iran will probably abandon a multi-billion-dollar contract to supply gas to Pakistan, the semi-official Fars news agency reported Iran's oil minister as saying on Wednesday.

"The contract for supplying gas to Pakistan is likely to be annulled," Fars quoted Iranian Oil Minister Bijan Namdar Zanganeh as saying on the sidelines of a gas forum in Tehran on Wednesday. He gave no other details, Fars said.

Under the contract, Iran is supposed to export 21.5 million cubic meters of gas per day to Pakistan from next year.

Dubbed the "peace pipeline", the $7.5 billion project has faced repeated delays since it was conceived in the 1990s to connect Iran's giant South Pars gas field to Pakistan and India.

Iran has already spent hundreds of millions of dollars and nearly completed the 900 km (560 mile) pipeline to the Pakistan border.

Pakistan, although suffering from severe gas shortages, has made little progress on its part of the line due to a lack of funds and warnings it could be in violation of US sanctions on Iran.

Zanganeh's comments came two days after his Pakistani counterpart, Shahid Khaqan Abbasi, was quoted by local media as saying that Pakistan risked being punished by sanctions on Iran if it goes ahead with the much-maligned project.

Until now Iranian officials have insisted that the project to supply Islamabad will be completed.

Exasperated by the lack of work across the border, Iran has even offered to build Pakistan's 780-kilometre section and provide multi-million dollar loans to help pay for it, according to Iranian media reports.

In contrast to his predecessor, Zanganeh has been open about the problems faced by Iran's energy sector since he took office in August.

On October 1 he warned that Iran faced serious gas shortages of its own because of slow progress in raising production from South Pars, the field that is supposed to fill the pipeline.

India quit the project in 2009, citing costs and security issues, a year after it signed a nuclear deal with Washington.

Iran sits on the world's largest reserves of gas. But Western sanctions aimed at stopping Iran's disputed nuclear activities have hindered its gas production growth, while the United States has pressured potential buyers to find other suppliers.