With Iranian President Ebrahim Raisi’s expected visit to Pakistan on April 22, authorities have commenced the work to begin the construction of the 80-kilometre section of the Pakistan-Iran gas pipeline from Gwadar to a point where it can be connected with the Iranian section of the project, reported an English daily on Sunday.
As per the publication, citing a senior official of the Energy Ministry, the Inter-State Gas Company (ISGS) has already issued tenders seeking the much-delayed re-validation of survey and Front-End Engineering Design (FEED) by consultants.
The development comes amid the United States’s explicit opposition to the bilateral project, coupled with warnings of potential sanctions, which has faced a nearly decade-long delay as it was set to be completed in December 2014 followed by its operationalisation in January 2015.
Over the years, Pakistan maintained that it could not materialise the project in its territory because of the US sanctions imposed on Iran, a view which authorities in Tehran have never subscribed, saying the US sanctions are not justified.
However, in January, Tehran issued the last notice to Islamabad seeking the completion of its side of the pipeline by February-March 2024 or face a $18 billion penalty under the penalty clause of the Gas Sales Purchase Agreement (GSPA) of the 781-kilometre project. According to the official, the laying down of the 80-km section of the pipeline is essential to avoid arbitration in France which may lead to the imposition of the aforesaid penalty on Pakistan.
Furthermore, he also added that re-validation of early survey and FEED is crucial as the 80-km section provisions two compressors one at the border and one at Gwadar as the 80-km part of pipelines would absorb 100mmcfd initially compared to the 750mmcfd which the project is expected to take-off for 25 years. Once this process is completed, the authorities will commence the land acquisition process which will then be followed by the awarding of Engineering, Procurement and Construction (EPC) contract. With the project slated for completion in 24 months at the cost of Rs44 billion, the Energy Ministry official noted that the Petroleum Division would seek a substantial amount for the project in the budget 2024-25 from PSDP amid the Finance Ministry’s expected inability to provide the necessary funds from the head of Gas Infrastructure Development Cess (GIDC).