Page 12 - DMEA Week 10 2023

DMEA PIPELINES DMEA

Pakistan faces $18bn fine from Iran

for failing to complete gas pipeline

IRAN THE state of Pakistan stands to be landed with to pursue action through the international courts
an $18bn fine from neighbouring Iran if it fails and Pakistan promised to complete the project
to complete a natural gas pipeline project that and proceed with the purchase of Iranian gas by
has been under discussion for some 20 years. 2024.
Construction had been due to get underway in As nothing further has been completed by
2012-13 and finish by 2014, but only the Iranian Pakistan, the country now finds itself facing a
section of the pipeline has been completed. steep fine that it cannot afford to pay.
Pakistan has failed to make progress on the Iran recently informed a visiting Pakistani
project so far because of the threat of sanctions delegation to Tehran that it considers the US
placed on Iran by the US. Pakistani officials have sanctions against Iran illegal and insisted that
been quoted in the local media as saying that Pakistan complete its side of the pipeline by Feb-
the funds are available for the project, but US ruary or March 2024. Pakistani officials recently
objections to Pakistan buying gas from Iran have informed a meeting of the country’s Public
prevented the government in Islamabad from Accounts Committee that Iran could claim a
proceeding. Washington has asked Islamabad to penalty of as much as $18bn.
abandon the project on several occasions. The finished Iranian section runs from Iran’s
Pakistan and Iran agreed to complete the southern gas fields to the Pakistan border. From
pipeline by 2014 and make it operational in there, the pipeline was due to continue to the
2015. Iran became frustrated with Pakistan’s lack Pakistani town of Nawabshah and connect with
of interest in completing the project and threat- Pakistan’s gas network.
ened in 2019 to take legal action against Islama- After several revisions to the project’s origi-
bad as stipulated by the gas sales and purchase nal deal, the pipeline would now supply Pakistan
agreement (SPA). Under the original agreement, with 8.7bn cubic metres per year, while its max-
Pakistan promised to pay Iran $1mn per day for imum capacity would be 40 bcm per year. The
each day after the agreed completion date until diameter will be 56 inches (1,422mm) and the
the pipeline is finished. A revised agreement was length about 2,775 km. The cost was estimated
drawn up later that year in which Iran agreed not at $7.5bn in 2013.™

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