Iran - China convey grave concerns with Pakistan over shelving IP gas pipeline project

Iran - China convey grave concerns with Pakistan over shelving IP gas pipeline project
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TEHRAN - Iran has showed its grave concern that for the last one and half years, no official delegation from Islamabad turned up in Tehran to review gas sales and purchase agreement (GSPA), one of top officials of Energy Ministry dealing with petroleum division told The News.

“Iran has come up with its annoyance and reservations about the project in a letter written to the federal minister for petroleum and natural resources who is right now the Prime Minister of Pakistan,” he said.

Pakistan and Iran had signed Gas Sales Purchase Agreement (GSPA) under IP project in 2009 in era of Pakistan Peoples’ Party.

“More importantly, China is also extremely upset over the sudden shelving of the project as its company CPP had finalised the agreement with Pakistan for building the 700 kilometers of the LNG pipeline from Gawadar to Nawabshah (as a part of IP project). China’s EXIM bank had agreed to fund the project under which 85 percent financing was to be arranged from China and to this effect an agreement was signed in September 2016 and since then no progress was done and ultimately the project was shelved. 

Chinese delegation has recently visited Pakistan and showed its concern over the sudden closure of the project and offered more relaxations in the price of the project. Since the Prime Minister has come back from US and he will himself meet with the Chinese officials and with his input, the petroleum division will also respond to the authorities in Iran,” he said.

The official also disclosed that Iran was not officially told by Pakistan that the said project is not alive which has also irritated the authorities in Iran. However, the official of the petroleum division dealing with IP project offered no comments over the development.

Iran, which has invested huge amount in laying down pipeline with diameter of 56 inches in its jurisdiction under IP gas line project from Paras gas field up to the area bordering with Pakistan, but Islamabad failed to comply with the provisions of the agreement inked with Tehran. 

In a recent letter sent to Pakistan in the name of Minister for Petroleum and Natural Resources who is now Prime |Minister of Pakistan Mr Shahid Khaqan Abbasi, Iran has expressed its dismay over zero progress on 781 kilometers pipeline under IP project to be laid down by Pakistan in its territory.

When the price of gas to be imported from Turkmenistan through Tapi gas line had been finalized lower than the Iranian gas price, Pakistan wanted to get the Gas Sales Price Agreement (GSPA) reviewed with penalty clause seeking application of penalty of $1 million per day from December 2018 and to this effect Iran was open to the amendment in the GSPA. 

Iran was also ready even to re-negotiate the price of gas as there is a clause which reads in case the buyer country manages the import of piped gas at lower price from any other country, then Iran will match it. “Unfortunately, no delegation from Islamabad went to Tehran for reviewing the gas price downward on account of unknown reasons and this has irked authorities in Iran too,” said a source.

Till now Iran has not responded positively to the move of Pakistan seeking force majeure. However, Iran has not demanded the penalty which is due from January 1, 2015 knowing the ground realities. US and one of the influential countries of Middle East were opposed to laying down of the pipeline and apparently because of the tremendous pressure on part of the said both countries, the government had shelved the project, which has been reported in this newspaper.

At that time the Minister of Petroleum and Natural Resources Shaid Khaqan Abbasi had said that IP project had been deferred and private sector is being encouraged to import LNG to cater to the future needs of the country. Abbasi had said that new LNG terminals are being erected. “If private sector succeeds, then the government may abandon the project,” Abbasi had argued.

It is important to note when the Nawaz government came in power in 2013, it was eager to compete this project and it had adopted very innovative strategy to complete this project in the presence of the economic sanctions and to avoid the wrath of US and one Middle Eastern country. The Nawaz government decided to construct $1.6 billion strategic and vital Gawadar-Nawabshah LNG Terminal and Pipeline Project (GNGP). 

Under this project, 700 kilometers LNG pipeline was to be constructed from Nawabshah to Gawadar and Iran was told LNG pipeline would be funded by China and when the sanctions on Iran would be erased completely, then this pipeline will be extended backward to Iran from Gawadar and then the whole pipeline would be re-named as IP gas line. This argument was sent out to authorities in Iran which is why it did not impose any penalty on Pakistan.

But now the scenario has changed as the IP project has been shelved. And according to the insiders, the said gulf country that always terms Iran the dangerous country to its existence, was factually opposed the IP project and mounted its pressure further on the top leadership of the country to erase this project once and for all saying the Gawadar-Nawabshah LNG terminal & Pipeline Project (GNGP) will ultimately be turned into Iran-Pakistan pipeline. 

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