Pakistan Sending Team to Iran For Gas Pipeline Project and Avoiding $18 Billion Fine

Pakistan will soon send a delegation to Iran for talks on the Iran-Pakistan Gas Pipeline (IPGP) project, sources informed ProPakistani.

The delegation will mostly comprise officials from the Ministry of Energy, while officials from the Ministry of Finance and the Ministry of Foreign Affairs are expected to join the delegation, diplomatic sources told ProPakistani.

According to sources, the delegation will discuss the penalty for the gas pipeline project’s delay with Iranian authorities. Pertinently, Pakistan has to complete its section of the IPGP project in its borders by February-March 2024 or face an $18 billion penalty for violating the agreement.

In case of non-implementation, Iran reserves the right to take action by invoking the penalty clause of the Gas Sales Purchase Agreement (GSPA). The agreement, originally signed in 2009 for 25 years, had a three-year construction period for Pakistan to lay down a 781-kilometer pipeline from the Iranian border to Nawabshah.

The project was supposed to be completed by December 2014, with operations beginning on January 1, 2015, in a segmented approach, with Iran building its portion and Pakistan building its own.

According to the original agreement, Pakistan was to pay Iran $1 million per day beginning January 1, 2015, as stipulated in the arbitration clause. However, under 2019’s amended agreement between the Inter-State Gas Systems (ISGS) of Pakistan and the National Iranian Gas Company (NIGC), Tehran has vowed not to go to any international court if construction was delayed, and Pakistan would not pay any compensation to Iran until 2024.

Iran has already completed a portion of the pipeline within its borders, from the gas field to the Pakistan border. Once completed and commissioned on both sides, the pipeline will allow Pakistan to begin receiving 750 million cubic feet of gas from Iran on a daily basis.

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