ISLAMABAD:
Pakistan has conveyed to Iran its intention to suspend the Iran-Pakistan (IP) gas pipeline project as part of an amicable settlement, while also offering to revive the project if a waiver from US sanctions can be obtained, sources said on Monday.
The IP pipeline project has remained stalled since 2014 due to US sanctions against Iran, although Tehran has granted extensions for more than a decade. Iran has also initiated legal action against Pakistan for failing to implement the project within the stipulated time.
According to the sources, Iran has agreed to extend the gas sales deal for another 10 years in a bid to get the IP pipeline project back on track. Pakistan, however, proposed an alternative option: implement the project only if the United States obtains a lifting of sanctions.
“Pakistan wants the deal to be extended if the US grants a waiver of sanctions, as well as a reduction in gas volumes and lower prices from Iran,” a source close to the development told The Express PK Press Club. Both sides engaged in backdoor diplomacy, and the issue was also raised during the visit of high-level dignitaries to Islamabad.
Discussions with various government officials showed that Pakistan had already informed Iran of its willingness to abandon the project due to Washington’s sanctions against Tehran. Officials said Pakistan is also facing a decline in domestic gas demand, while Qatar is expected to supply 24 LNG cargoes in 2026.
“As of now, Pakistan does not require additional gas due to low demand,” an official said, adding that IP gas prices were also higher than the prevailing LNG prices in the country. “Pakistan is also under pressure from the US over the IP gas pipeline project.”
Pakistan had earlier requested a waiver from the United States to execute the IP gas pipeline project, which Washington refused to grant. Matthew Miller, a State Department spokesman under the previous administration, warned that the United States would continue to implement sanctions against Iran.
“And of course, we also advise anyone considering trade deals with Iran to be aware of the potential ramifications of those deals,” Miller, who served under then-President Joe Biden’s administration, had said.
Iran claims to have completed its part of the pipeline, while Pakistan has not yet started construction on its side. Officials said Iran remained willing to extend the gas sales deal for another decade, but Pakistan wanted to suspend the project due to U.S. sanctions and weak domestic demand.
Over the years, Pakistan has explored other options to implement the pipeline project. As part of a plan, Islamabad has proposed building an LNG pipeline to Gwadar, with an 80-kilometer extension to the Iranian border. A Chinese company had also expressed interest in building the pipeline, but the project was abandoned due to US sanctions.
Currently, Pakistan depends on imports of liquefied natural gas from Qatar. “This gas is intended to meet the needs of consumers in the power sector,” an official said. However, the power sector has not been able to absorb the entire volume of LNG imports from Qatar, leading to a gas glut.
To address this surplus, the government recently announced two initiatives to boost LNG consumption. Incentives have been introduced under a phased power supply program to provide lower-cost electricity to the agricultural and industrial sectors over a three-year period, thereby enabling greater use of LNG in the power sector.
The government also lifted a decade-old ban on new gas connections for domestic and commercial consumers. New consumers will receive gas at LNG prices to “improve LNG consumption and solve the problem of excess gas”.
