Iran buckles under force majeure pressure

ABDUL RASHEED AZAD & ALI HUSSAIN

ISLAMABAD: Pakistan and Iran have agreed on a two-year extension in completion of Iran-Pakistan (IP) gas pipeline project, it is learnt.

Official sources told Business Recorder here on Wednesday that Iran agreed to an extension only Pakistan invoked force majeure on IP due to international sanctions against Iran to circumvent the penalty clause of the agreement. According to the penalty clause, if any country fails to complete the deadline it shall have to pay $ 2 million per day to the other country.

The deadline of the IP gas pipeline project was December 31, 2014 and due to mutual agreement Iran has not imposed any penalty on Pakistan, the officials said.

"Now both the countries have decided to complete gas pipeline project by the end of 2016 or in the beginning of 2017. Pakistan in March 2015 is to start construction work on 700 kilo-meters (Km) long Gwadar-Nawabshah Liquefied Natural Gas (LNG) project, which would require an extension of only 70 KM to connect with the Iranian side of the pipeline," the official added.

Officials in Pakistan are optimistic about the success of the talks between Iran and the P5+1 representatives, as the two sides have agreed to resume talks next Monday after announcing "positive" progress in the recent two-day talks between US Secretary of State John Kerry and his Iranian counterpart Mohammad Javad Zarif in Geneva.

"We are hoping it will pave the way for this project [IP gas pipeline] if there is progress in the talks between Iran and P5+1 representatives," said a senior Foreign Office official.

To complete the construction of Gwadar-Nawabshah LNG pipeline Pakistan on government to government basis a contract has been awarded to Chinese oil/gas company China Petroleum Pipeline Bureau (CPP). Not only will the Chinese company lay the pipeline but it will also build an LNG terminal and the cost of the LNG pipeline and terminal is estimated at $ 2.5 billion.

"The company will not only construct the LNG pipeline but will also bring the required funds for the project. The company on the directions of the Chinese government will also construct the LNG terminal in Gwadar, which is most likely to be an offshore terminal. Initially the terminal will have a capacity to handle up to 500 Million Cubic Feet per Day (MMCFD) of LNG, and later the capacity of the terminal will be expanded to one BCFD," the official maintained.

Officials further revealed that the Prime Minister of Pakistan during his last visit to China signed an agreement to lay the Gwadar-Nawabshah LNG pipeline, which as per government of Pakistan plans could be extended to transport gas from Iran under the Iran-Pakistan (IP) gas pipeline project.

The official also said that the government is waiting for the sanctions to be lifted from Iran to complete the IP gas pipeline project which will transport 750 MMCFD gas from Iran to Pakistan.