Iran has every reason to be upset with Pakistan as it has backed out of IP Gas pipeline for extraneous reasons, namely US and Saudi pressure. Even Chia is annoyed at Pakistan decision because it has spent time and money to be part of the IP venture
Whatever prospects of a turnaround in Iran-Pak ties have appeared in recent weeks have now been dashed to ground, thanks to Islamabad’s inability to push ahead with the Iran-Pakistan (IP) gas pipeline. Iran has just conveyed its annoyance at Pakistan shelving the project, Khalid Mustafa reported in The News International, a leading Karachi daily, today.
“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,” a top energy ministry official familiar with the IP project told the daily.
What appears to have upset Tehran is the fact that Islamabad has not bothered to convey that it is shelving the pipeline. “Iran was not officially told by Pakistan that the said project is not alive which has also irritated the authorities in Iran”.
The two countries had entered into gas deal by signing Gas Sales Purchase Agreement (GSPA) under IP project in 2009 when Pakistan Peoples’ Party was in Islamabad’s driver seat. President Asif Zardari also showed keen interest in the venture.
“Iran was not officially told by Pakistan that the said project is not alive which has also irritated the authorities in Iran”.
Besides Iran, China is also upset over requiem for IP pipeline. A Chinese company, CPP has been engaged to lay the 700 kilometer long LNG pipeline from Gwadar to Nawabshah as a part of IP project. China’s EXIM bank has been roped in arrange 85 per cent of the funding. An agreement was even signed in September last year.
But no progress was made. And a Chinese delegation that visited Pakistan recently tried to revive the shelved project by offering more price concessions. 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 respond to the authorities in Iran,” officials are reported as saying.
Iran has invested a huge amount in laying pipeline with diameter of 56 inches in from Paras gas field up to the border with Pakistan. It also offered help in laying the pipeline inside Pakistan over 780km stretch but Islamabad failed to comply with the provisions of the agreement inked with Tehran. There is zero progress on the Pakistan end of the pipeline.
Interestingly, Iran has been more than accommodative of Pakistani concerns particularly over gas price. The Turkmenistan gas to be received through TAPI pipe line is cheaper than the Iranian gas price, Pakistan also wanted a review of penalties under to Gas Sales Price Agreement (GSPA). Iran was willing to amend the GSPA. It also conveyed willingness to re-negotiate gas price. In fact the IP deal has a proviso that states in the event the buyer (Pakistan) gets gas at a lower price from any other country, then the seller (Iran) will make a matching offer.
Yet, Pakistan did not bother to send officials to Tehran to renegotiate the Iran gas price after TAPI deal was finalised. “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,” an unidentified source was quoted as saying in The News.
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. U.S., and one of the influential countries of Middle East are opposed to laying down of the IP pipeline and their pressure made the Nawaz government to shelve the project despite an occasional denial.
As Minister of Petroleum and Natural Resources Shaid Khaqan Abbasi had favoured LNG imports. “If private sector succeeds (in importing LNG), then the government may abandon the (IP) project,” he said once in the past.
Interestingly, when it came to power in 2013, the Nawaz government saw IP pipeline as a short cut to energy nirvana and adopted innovative strategies to complete it despite US led sanctions on Iran. It decided to construct $1.6 billion strategic and vital Gwadar-Nawabshah LNG Terminal and Pipeline Project (GNGP). Under this project, 700 kilometers LNG pipeline was to be constructed from Nawabshah to Gwadar.
Iran was told LNG pipeline would be funded by China and that once the sanctions were lifted, the pipeline would be extended backward to Iran from Gwadar. That would be the stage for the pipeline to be rechristened as Iran-Pakistan gas pipeline. Impressed by the argument, Iran did not invoke the penalty clause to the great relief of Pakistan.
Iran-Pakistan (IP) pipeline was originally conceived as a three nation venture including India. I-P-I line did not take off due to India’s security concerns as the line was to be laid through trouble torn Baluchistan. Now Pakistan has backed out without offering any valid ground formally. Well, Iran has reasons to be upset. Badly that too.