Preparations are underway for the visit of Iranian President Ebrahim Raisi to Pakistan on April 22, with authorities initiating the construction of an 80-kilometer segment of the Pakistan-Iran gas pipeline from Gwadar to a connection point with the Iranian section of the project.
Citing a senior official from the Energy Ministry, the publication stated that the Inter-State Gas Company (ISGS) has issued tenders to seek re-validation of surveys and Front-End Engineering Design (FEED) by consultants, a process that has been long delayed.
The development occurs amidst explicit opposition from the United States to the bilateral project, along with warnings of potential sanctions. The project has faced nearly a decade-long delay since its intended completion in December 2014, followed by operationalization in January 2015.
Despite Pakistan’s assertion that the project couldn’t proceed due to US sanctions on Iran, Tehran has consistently maintained that these sanctions are unjustified.
In January, Tehran issued a final notice to Islamabad, demanding the completion of its portion of the pipeline by February-March 2024, or face an $18 billion penalty under the penalty clause of the Gas Sales Purchase Agreement (GSPA) for the 781-kilometer project.
The official emphasized the urgency of laying the 80-kilometer pipeline section to avoid arbitration in France, which could result in Pakistan being liable for the aforementioned penalty.
Moreover, re-validation of early surveys and FEED is deemed crucial, as this segment of the pipeline involves the installation of two compressors, one at the border and one at Gwadar. Initially, the 80-kilometer pipeline section is expected to handle 100 million cubic feet per day (mmcfd), compared to the anticipated 750 mmcfd for the project’s 25-year duration.
Upon completion of this process, authorities will proceed with land acquisition, followed by the awarding of Engineering, Procurement, and Construction (EPC) contracts.
The project, estimated to be completed in 24 months at a cost of Rs44 billion, will seek a significant allocation from the Petroleum Division in the 2024-25 budget from the Public Sector Development Programme (PSDP), as the Finance Ministry is expected to be unable to provide the necessary funds from the Gas Infrastructure Development Cess (GIDC) head.
