Pakistan, Iran to sign extension in IP gas line agreement next week

Islamabad and Tehran have extended the Iran-Pakistan (IP) gas line GSPA (gas sales purchase agreement) for next five years till August 26, 2024 through a mutually agreed amendment.

Under earlier GSPA, Pakistan was to have a first gas inflow from Iran under IP gas line from January 1, 2015 after implementing the gas project by December 31, 2014, reveals a draft agreement approved by cabinet which will be signed by both the sides next week.

According to the copy of the draft agreement available with The News, French legal counsel Gide Loyrette Nouel (GIDE), Attorney General Pakistan and Law Ministry played pivotal role in finalising the draft for amendment on the IP-GSPA.

Under the IP gas project, Pakistan was to import gas of 750mmcfd which was to increase up to 1,000mmcfd and additional quantity of 250mmcfd was to be used in Gwadar.

Since Pakistan remained unable to lay down 781 kilometres pipeline under its territory from Iranian border touching Gwadar and reaching up to Nawabshah because of failure to arrange the required financing in the wake of US sanctions, Iran served legal notice on Pakistan in February 2019 for failure in implementing the gas line project and getting Iranian gas from January 1, 2015. After agreement to extend the IP-GSPA, Iran has already withdrawn legal notice it served on Pakistan on moving the arbitration court.

As per official document, now the top officials of National Iranian Oil Company (NIOC) and Pakistan’ Inter-State Gas System (ISGS) will sign next week in Istanbul (Turkey) the amended IP gas deal under which Pakistan will build the said pipeline by August 26, 2024 and after that Iran will take legal course if Pakistan fails. However, it all again depends if the US sanctions remain very much there or these curbs are done away with during next five years.

According to the document, the amendment in the IP gas deal was to earlier get signed in Turkey by August 26, but it got delayed as the name of Mobin Saulat, Managing Director of Inter-State Gas System, was Exit Control List (ECL) as he is facing a NAB case against the award of first LNG terminal. Now Mobin Saulat has managed to get one time exemption for going aboard, so he will now be in Istanbul in next week to sign the amended GSPA.

Prime Minister Imran Khan visited Tehran on April 20-21 and on the sidelines Special Assistant to Prime Minister on Petroleum Nadeem Babar held meeting with Iranian counterpart. The Iranian side was of the view that since Pakistan did not respond to the proposed addendum to the IP-GSPA -- the only legal remedy left for Iran was to issue legal notice to Pakistan. During the particular visit, Iranian side intended to withdraw the notice if the agreement on extension of IP gas sales purchase accord is finalised.

A source said the federal cabinet meeting held last Tuesday did not amend the IP gas line deal, rather gave approval to authorities concerned to sign a document assuring Iranian side that Pakistan is still for IP gas line and acknowledges the rights of Iran under GSPA. In the document to be signed next week in Istanbul, Iran will withdraw the notice it earlier served on Pakistan in February 2019.

The agreement was earlier signed in 2009 during PPP government for 25 years, but since then the project could not get the shape. Also most 10 years have elapsed since the signing of the agreement and the construction period for pipeline in Pakistan territory which comprises three years has been wasted. The Iranian authorities want Pakistan to mutually extend this period under GSPA. Iran has already asked Pakistan to review the price of gas under IP, but no talks on this issue have been held so far.