This week’s visit by Iranian President Ebrahim Raisi to Pakistan brought attention to a significant gas pipeline agreement between the two neighbors that has been delayed by geopolitical concerns and international sanctions.
In a joint statement issued after the visit, the two countries reaffirmed the significance of working together in the energy sector, particularly commerce in electricity, power transmission lines, and the IP Gas Pipeline Project.
The following information relates to the project, which goes by the name of the Peace Pipeline:
The 2010 pipeline agreement called for the 25-year delivery of 750 million to one billion cubic feet of natural gas per day from Iran’s South Pars gas field to Pakistan in order to address the country’s growing energy demands.
Over 1,900 kilometers (1,180 miles) of pipeline were planned, of which 1,150 kilometers were located in Iran and 781 kilometers in Pakistan.
Tehran claims that the pipeline on their side of the border has already been built and is ready for export after an initial $2 billion investment.
However, Pakistan chose not to start building and said shortly after the agreement that the project was shelved indefinitely, citing international sanctions against Iran as the justification.
In response, Iran’s oil minister stated at the time that Iran had kept its end of the bargain and that it expected Pakistan to do the same, while also urging Pakistan to quicken its efforts.
– Pakistan requested a 10-year extension in 2014; the pipeline is scheduled to be completed in September of this year. Iran has the authority to penalize Pakistan in an international court. According to local media, Pakistan might face fines of up to $18 billion if it fails to uphold its end of the bargain.
– Earlier this year, Pakistan’s caretaker administration approved plans to begin construction on an 80 km section of the pipeline in principle, despite the possibility of a punishment.
– Islamabad declared in March that it will request a waiver of US sanctions for the project. Later that week, though, the US made it known that it was not in favor of the project and warned against doing business with Tehran due to the possibility of sanctions.
Pakistan is looking to negotiate a new longer-term bailout agreement with the International Monetary Fund (IMF) in the next weeks, therefore Washington’s assistance is critical.
Pakistan is in desperate need of inexpensive gas since its own reserves are running out quickly and LNG deals are driving up the cost of supply amid already high inflation. Pakistan’s home and industrial consumers rely on natural gas for heating and energy needs.
– According to BP Statistical Review of World Energy, Iran possesses the second-largest gas reserves in the world behind Russia, but its growth as an exporter has been hampered by Western sanctions, political unrest, and construction delays.
– The agreement had called for expanding the pipeline to India, but Delhi eventually withdrew from the undertaking.
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