Crucial talks on IP project in Tehran today

ISLAMABAD: Officials from Pakistan and Iran will meet on Tuesday (today) in Tehran in an effort to break a persisting deadlock on a multibillion-dollar gas pipeline project amid fears that Islamabad’s apparent failure to commission the project within the stipulated time could cost it billions of dollars in penalties.

A Pakistani delegation comprising the managing director of Inter-State Gas Systems, Mubeen Saulat, left for Tehran on Monday to hold talks with Iranian authorities on the $7.6 billion Iran-Pakistan (IP) gas pipeline project which has repeatedly hit snags since the deal was signed during the previous PPP-led government.

According to the gas sales purchase agreement, Pakistan was to commission the project on December 2014 but was unable to start construction work on its portion of the pipeline due to threats of US sanctions.

“Now, Pakistani authorities will put forward alternative plans to materialise the project while seeking an extension in the deadline for the first flow of gas from Tehran to avoid penalties,” an official told The Express Tribune. Under the deal, Pakistan may face a per day penalty of $3 million if it fails to implement the project by Dec 2014.

The Economic Coordination Committee (ECC) recently approved laying of an LNG pipeline from Gwadar to Nawabshah and setting up of an LNG terminal at Gwadar port. Officials say Iranian authorities would be asked to wait till the lifting of US sanctions on Tehran and Pakistan would lay the pipeline meanwhile.

Under the first proposal, Pakistan would lay a 60-kilometre-long pipeline to connect with the Iranian pipeline if the US sanctions are lifted.

According to the second proposal, Pakistani authorities would offer an alternative plan of gas import to Iranian authorities by converting natural gas into LNG, a move that will lead to shelving of the IP project.

Under this plan, Iran would convert natural gas into LNG and then export it to Pakistan by using the terminal facility of Oman which has already signed a deal with Iran for the purchase of around $60 billion worth of natural gas over the next 25 years. Around 50% of the total amount of the gas exported to Oman would be delivered to Japan, South Korea, and especially India.

“We may also use Oman’s LNG terminal facility to import gas from Iran,” a Pakistani source said.

According to officials, Iran has also conveyed to Pakistan that it has some proposals to implement the IP project amid US and EU sanctions which would be discussed in Tuesday’s meeting in Tehran.

The United States has been pushing Pakistan to import LNG and shelve the IP project. Iran has conducted several training courses for Pakistani officials relating to the LNG import and providing technical assistance to import LNG from Qatar and some other parties through a bidding process by Pakistan State Oil.

Iran had reached a historic deal with the United States and five other world powers in November last year accepting strict checks on its nuclear program in exchange for partial relief from sanctions. Islamabad wants Tehran to also take up issue of IP project with Washington under the deal.

Published in The Express Tribune, October 28^th, 2014.