BMP wants speedy work on long-awaited Pak-Iran gas line to ease energy issues

Early completion of project to be a great favour for industry

ISLAMABAD   -  The Federation of Pakistan Chambers of Commerce and Industry’s (FPCCI) Businessmen Panel (BMP) has welcomed the Cabinet Committee’s approval of work on 80-kilometer first phase of the Iran-Pakistan gas pipeline project within its borders after a long delay and hoped that it would proceed expeditiously, as the project is bound to bring an industrial revolution in Pakistan.

Businessmen Panel (BMP) Chairman and FPCCI former president Mian Anjum Nisar said the businessmen had already been pressing the government hard for procuring the required energy resource from whatever source suits to it to relieve the country of the mounting shortage of gas.

The Iran-Pakistan gas pipeline project began in 2013, and several deadlines have already been missed due to long-standing US sanctions against Tehran. According to reports, Pakistan was trying to negotiate with Tehran to avoid a whopping $20 billion in liabilities as the long-stalled project’s deadline approaches this year. Last year, government also approached Washington, requesting a solution to the lingering imbroglio, but received no response.

We are convinced that Iranian source was the most feasible, financially as well as from the point of view of proximity. He observed the Iran-Pakistan gas pipeline would serve Pakistan’s national interests and go a long way in mitigating the energy issues, asserting that an early completion of this mega project of national importance would be a great favour to the business community as its very survival was at stake at the moment. The availability of gas would also help government achieve economic targets. It is to be noted that in a landmark development, the Cabinet Committee on Energy has approved the initiation of work on the 80-km segment (Iranian border to Gwadar) of the Iran-Pakistan Gas Pipeline project, and deferred the filing of application for waiver of US sanction on the project due to geo-political situation.

A summary of Petroleum Division regarding IP Gas Pipeline was presented to the Cabinet Committee on Energy in its meeting, giving its nod to the recommendations of the Ministerial Oversight Committee (MOC) for the IP Project.

The committee recommended to start work on the 80-km segment of the pipeline inside Pakistan i.e. from Pakistan border up till Gwadar in the first phase. The project will be executed by Inter State Gas Systems (Pvt) Ltd and will be funded through Gas Infrastructure Development Cess (GIDC). All the concerned divisions gave a positive nod to move ahead with the project to ensure gas supplies to the people of Pakistan, thereby addressing the increasing energy needs of the country. Pakistan has decided to kick -off construction work on 80 kilometre portion of Iran-Pakistan gas pipeline project- from Iranian border to Gwadar- to escape a potential penalty of $18 billion, in case Tehran decided to move to the Paris-based International Arbitration for non-execution of the project. Initially, it has been decided that in first phase of IP project work on 80-km portion from Pak-Iran border to Gwader will be started.

The estimated cost of the 80-km Pak-Iran border to Gwadar portion of the project will be $158 million and it has been decided to fund it through Gas Infrastructure Development Cess (GIDC). During the PDM coalition government, the then Prime Minister Shehbaz Sharif had constituted a committee to recommend a way forward regarding the IP project keeping in view its economic viability, financing, etc on January 31, 2023. However, the committee was replaced by the interim government with Ministerial Oversight Committee (MOC) on September 11, 2023. The MOC endorsed the decision of the previous committee and got the waiver application prepared by foreign legal counsel. Moreover, MOC also obtained the legal opinions from foreign legal counsel, M/s Willkie Farr & Gallagher LLP. With regards to US sanctions on Iran, M/s Willkie Farr opined that if Pakistan proceeds with the project, there is a likelihood of imposition of sanctions on the company. Regarding the Force Majeure and Excusing Event notice, M/s Willkie Farr opined that Pakistan does not have a strong case post September 2019 under the French law as no documentary evidence is available to support that concrete steps have been taken by Pakistan to implement the project. The MOC, after due consideration to the discourses held with Iran during the past one year has recommended that though the final draft of the waiver application is ready, its filing with US authorities is deferred due to current geo-political situation.

He said that in May 2009 agreement for the project was signed, for supply of gas of 750 MMCFD for 25 years from South Pars gas field of Iran and delivery at Pak-lran border. Under the project 1,931-km line will be laid for transportation of Iranian gas to Pakistan, including 1,150-km long pipeline within Iran and 781-km within Pakistan. According to the deal, Iran will initially transfer 30 million cubic meters of gas per day to Pakistan, but will eventually increase the transfer to 60 million cubic meters per day.

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