ISLAMABAD:
Pakistan has conveyed to Iran its intention to shelve the Iran-Pakistan (IP) gas pipeline project under an out-of-court settlement framework, while offering to revive the project if a waiver from US sanctions can be obtained, sources said on Monday.
The IP gas pipeline project has remained stalled since 2014 due to US sanctions against Iran, despite Tehran granting extensions of more than a decade. Iran has also initiated legal proceedings over Pakistan’s failure to implement the project within the stipulated time frame.
According to sources, Iran has agreed to extend the gas sales agreement for another 10 years in an effort to get the IP gas pipeline project back on track. Pakistan, however, presented an alternative option of implementing the project only if exemption from US sanctions is obtained.
“Pakistan wants the deal to be extended if the US grants a sanctions waiver, along with reduced gas volumes and lower prices from Iran,” a source close to the matter told The Express PAkGazette. Both sides have been engaged in covert diplomacy, and the issue was also raised with high-profile dignitaries visiting Islamabad.
Conversations with several government officials indicated that Pakistan had already informed Iran of its desire to abandon the project due to Washington’s sanctions against Tehran. Officials said Pakistan is also facing lower domestic demand for gas, while Qatar plans to supply 24 cargoes of LNG in 2026.
“For now, Pakistan does not need additional gas due to low demand,” an official said, adding that IP gas prices were also higher than the prevailing LNG prices in the country. “Pakistan is also under pressure from the United States regarding the IP gas pipeline project.”
Pakistan had previously requested a waiver from the United States to execute the IP gas pipeline project, which Washington refused to grant. Matthew Miller, a State Department spokesman during the previous administration, had warned that the United States would continue to apply sanctions against Iran.
“And, of course, we also advise anyone considering trade deals with Iran to be aware of the potential ramifications of those deals,” Miller, who served under then-President Joe Biden’s administration, had said.
Iran maintains that it has completed its part of the pipeline, while Pakistan has not yet begun construction on its side. Officials said Iran remains willing to extend the gas sales deal for another decade, but Pakistan wants to shelve the project because of U.S. sanctions and weak domestic demand.
Over the years, Pakistan has explored alternative options to implement the pipeline project. According to one plan, Islamabad proposed to build an LNG gas pipeline to Gwadar, stretching 80 kilometers to the border with Iran. A Chinese company had also expressed interest in building the pipeline, but the project was shelved due to US sanctions.
Pakistan is currently dependent on imports of liquefied natural gas from Qatar. “This gas is intended to meet the needs of consumers in the electricity sector,” an official said. However, the power sector has been unable to increase the total volume of LNG imports from Qatar, resulting in a gas glut.
To address the surplus, the government recently announced two initiatives to boost LNG consumption. Incentives have been introduced under an incremental electricity supply package to provide lower cost energy to the agricultural and industrial sectors over a three-year period, enabling greater utilization of LNG in the power sector.
The government also lifted a decade-long ban on new gas connections for domestic and commercial consumers. New consumers will receive gas at LNG prices to “improve LNG consumption and address the issue of surplus gas.”
