The Cabinet Committee on Energy (CCoE) granted approval on Friday for the initiation of work on the 80-kilometer segment of the Iran-Pakistan (IP) gas pipeline project within the country.
According to a press release, the committee, acting on a recommendation from the Petroleum Division, has endorsed the commencement of the project, starting from the Pakistan-Iran border up to Gwadar in the initial phase. Inter State Gas Systems (Pvt) Ltd. is set to execute the project, which will be funded through the Gas Infrastructure Development Cess (GIDC). All relevant divisions have given their positive approval to move forward, with the primary objective of meeting the increasing energy needs of Pakistan and ensuring a stable supply of gas to its citizens.
The press release emphasised the significance of the project for enhancing the energy security of Pakistan and instilling confidence in the local industry through improved gas supplies. The project is anticipated to stimulate economic activity in the Balochistan province, thereby contributing to the overall economic progress of Pakistan.
Earlier in the week, the media reported that Islamabad has committed to completing the first phase of the 80-kilometer IP gas pipeline project within its territory to avert a potential $18 billion penalty. Iran has granted a 180-day extension until September 2024, aiming to avoid litigation in international courts. Experts suggest that diplomatic relations between Pakistan and Iran could be strained if legal action is pursued by Iran to safeguard its rights concerning the pipeline project.
Despite the sanctions imposed by the United States, Pakistan has decided to proceed with the construction of the IP gas pipeline within its borders to fulfil its commitment to Tehran.
Historically, Pakistan and Iran have enjoyed good relations, particularly during the reign of the Pakistan Peoples Party (PPP). During Asif Ali Zardari’s presidency, both countries signed a Gas Sales Purchase Agreement (GSPA), binding Pakistan to commence construction on the IP project. In the past, Pakistan imported Iranian oil – the supply, however, ceased in 2010 when Pakistani refineries failed to make payments. Although payment was never a significant issue between the two nations – both had worked out currency swaps and barter trade arrangements – experts believe the primary reason for the fallout was the US’s reluctance to show flexibility regarding oil and gas trade between Pakistan and Iran.
