ISLAMABAD - Sceptical about Pakistan’s intentions about materialising the long-awaited Iran-Pakistan (IP) gas pipeline project, Iran has shown some flexibility but demanded Pakistan show some ‘seriousness’ by taking concrete measures instead of relying on verbal statements.
Informed sources told The Nation that Iran has expressed her conditional willingness to extend the deadline and waive off the penalty clause already set for the completion of the gas project. As per a tentative understanding reached between the two sides regarding reviewing the previous agreement, Pakistan would ‘at least show seriousness’ towards materialising the project by initiating some practical work with own resources on its side.
“Besides giving some conditions cum proposals to materialise the much hyped gas import project on fast track basis, Iran was found positive and ready to waive off the penalty clause of the agreement under which failure on part of a party entails penalties equivalent to the price of daily gas quantities that is around $3 million for every day’s delay in completion of the project,” according to top seated petroleum gurus.
“An Iranian delegation would visit Pakistan very soon to materialise the needed amendments, under which extension in gasline deadline would be made and penalty clause would be exempted,” they said, adding the two countries have conceived the impact of sanctions on Iran, as both are now also waiting for the inclusion of India in the IP gas pipeline project.
Talks on setting new timeframe for the completion of the pipeline project were held on February 3 in Tehran between the concerned authorities of both brother countries. Pakistani authorities made all out efforts during talks to convince Iranians regarding Pakistan’s point of view and sought extension in the timeframe for completing the work as well as exemption from the heavy penalty to be incurred in case of delay in the project.
During the talks, Pakistan informed the Iranian side that the US sanctions against Iran had badly affected the project and no financier or contractor was ready to participate in the project for laying the 670 kilometre section of the pipeline on its side by Dec 2014. Pakistan had invited bids but no company participated in it. However, Pakistan was determined to complete the project.
“The Pakistani delegation has dispelled the impression that Pakistan might abandon the $1.5 billion project due to pressure from the US, Saudi Arabia and some other oil-rich states. Pakistan also made it loud and clear to the Iran that it would complete the gas import project at any cost,” a senior official at petroleum ministry said.
The sources also told that relevant authorities of both the countries have realised that their gas pipeline would not come on stream by Dec 2014 following the imposition of sanctions on Iran by the world powers. And, Iran, in principle, has agreed to set new realistic timeframe for the construction of the much-needed energy resource to Pakistan.
Under the Gas Sales Purchase Agreement (GSPA) signed earlier with Iran by the outgoing PPP government in 2009, the first flow of gas to Pakistan should have started by Dec 31, 2014. The two countries are responsible for completion of the pipeline within their territories. Failure on part of a party entails penalties equivalent to the price of daily gas quantities that is around $3 million for every day’s delay in completion of the project. Iran can also claim billions of dollars in compensation for any breach of contract.
Following the approval of a board of Inter State Gas Company (ISGC), a delegation of ministry of petroleum and natural resources comprising the officials of the ministry and ISGC flew to Iran on Sunday under the chairmanship of secretary petroleum to hold negotiations with Iranian authorities, particularly the National Iranian Gas Exports Company. The ISGC board reached on a consensus that Pakistan should continue work on IP gas pipeline project. The board also granted permission to the ISGC and mandated it to hold negotiations with Iran for a new timeline of the multi billion project to avoid heavy penalty.
It is worth mentioning here that Iran had laid pipeline on its side by investing $2 billion but Pakistan failed to lay the pipeline on its side. Pakistan had invited bids but no company participated in it. Iran committed two tranches of $250 million each to lay Pakistan’s portion of the pipeline but recently it declined to provide financing, saying it was ready to provide gas but would not provide funds for Pakistani portion of the project.