The caretaker government has reportedly assured Iran it will move forward with laying a gas pipeline within its territory, aimed at importing Iranian gas, sources in the Petroleum Ministry said.
This decision comes after repeated warnings and potential arbitration threats from Iran regarding the stalled project, the sources said.
- Pakistan government acted in response to Iran's notice of damages for failing to purchase gas.
- Iran has set a deadline of September 2024 for completion of the pipeline on Pakistan's side.
- Failure to meet the deadline could result in a $18 billion claim against Pakistan at an international arbitration forum.
- Sui gas companies will be responsible for laying the 81km pipeline from Gwadar to the Iranian border.
Pakistan signed a gas pipeline agreement with Iran in 2014, aiming to import gas to address its energy needs. However, the project has faced numerous delays due to various factors, including US sanctions against Iran and internal disagreements within Pakistan.
- Iran issued three notices to Pakistan in 2019, 2022, and most recently in December 2023, demanding to either complete the pipeline or face legal consequences.
- The latest notice warned of a potential $18 billion arbitration claim if Pakistan fails to meet the September 2024 deadline.
With this recent assurance, Iran might delay the arbitration process depending on the progress made by Pakistan. Sui gas companies will be tasked with carrying out the construction of the 81km section within Pakistan's territory.
- The success of this project hinges on timely completion and overcoming any potential hurdles to avoid arbitration and subsequent financial penalties.
- If successful, the pipeline could provide a much-needed source of energy for Pakistan while also strengthening its economic ties with Iran.