IP pipeline: Ministry seeks to hold fresh price talks with Iran

The Express Tribune– The Ministry of Petroleum and Natural Resources is seeking the green light from the Economic Coordination Committee (ECC) for resuming stalled negotiations with Iran on laying a gas pipeline between the two countries.

The ministry will look for a further reduction in the gas import price and extension in the project completion date as international sanctions on Iran have been lifted.

“The Finance Division, Ministry of Foreign Affairs and Ministry of Planning have already endorsed the proposal of kicking off negotiations on the Iran-Pakistan (IP) gas pipeline in order to review the gas price,” said a senior government official.

As an alternative to the IP pipeline, the Executive Committee of National Economic Council (Ecnec) has approved the $2-billion Gwadar liquefied natural gas (LNG) pipeline project, which will be executed by China Petroleum Pipeline Bureau, a Chinese company, under a government-to-government arrangement.

Later, a part of this pipeline covering 80 kilometres will be stretched from Gwadar to the Iranian border to connect to the IP pipeline.

“We are working with China Petroleum Pipeline Bureau on the Gwadar LNG pipeline and it is willing to connect remaining portion of the pipeline from Gwadar to the Iranian border,” Mobin Saulat, Managing Director of Inter State Gas Systems (ISGS), told The Express Tribune.

The company would also work as an engineering, procurement and construction (EPC) contractor on an LNG terminal at Gwadar, he said. Earlier, it had expressed the desire to work on the build-and-operate model.

He noted that Pakistan was facing gas shortage and the LNG terminal and pipeline would help ensure energy security in the country.

“The project will increase employment opportunities as thousands of jobs will be created in Balochistan and Sindh,” said the managing director of ISGS, a state-owned company that mainly works on gas import projects. “The project will play an important role in boosting economic activities in Balochistan.”

Earlier, a meeting was held between the petroleum ministers of Iran and Pakistan on March 27, 2016 during the visit of Iran President Hassan Rouhani to Islamabad.

Both the ministers discussed the way forward and agreed to resume the stalled negotiations on the IP gas pipeline including extension in the project time frame and a review of the import price.

It was also decided that a delegation from Pakistan would visit Iran shortly to discuss amendments to the pipeline project deal. Iran extended an invitation, suggesting the delegation could come in early May 2016 or any other convenient date.

According to the original gas sale and purchase agreement, the first gas flow through the $7-billion IP pipeline was to start from January 1, 2015. However, the project could not be completed, prompting Pakistan to propose extension in the time frame.

Pakistan shared with Iran draft amendments to the sale and purchase agreement. Iran also suggested some amendments, but did not share a formal draft.

On the ECC’s recommendation, the cabinet had approved the gas sale and purchase agreement on April 8, 2009. Now, the petroleum ministry is asking the ECC to allow ISGS to start fresh talks with National Iranian Oil Company on amendments to the agreement.

Published in The Express Tribune, November 12th, 2016.