Finally, it seems as though the long-awaited Iran-Pakistan (IP) gas pipeline will come to pass. Motivated by need and strengthened by the state of the world today, Pakistan plans to start and finish a short 80-kilometer section of the pipeline quickly.
Originally planned to cover a total distance of 785 km, from the Iran border via Balochistan, Sindh, and Punjab, this more modest project seeks to quickly reach its first milestone.
By finishing the building of its seventh cross-country gas pipeline, which runs 1,172 kilometers from Asalouyeh to Iranshahr, Iran has already performed its share of the agreement. It then stretches another 270 km to the Pakistani border, according to the information that is currently accessible online.
Given the political and economic fallout from conflicts like those in Gaza and Ukraine, as well as inflationary pressures and threats to Western financial and real estate markets—especially in an election year in many regions—it makes sense that Western countries would be preoccupied with their own problems. Therefore, a tiny pipeline agreement between two countries in which they have little direct interest might not receive much attention.
“We may be able to get around US sanctions by breaking the project up into smaller, more manageable segments.”
Moreover, Pakistan’s trust about commercial links with energy-rich Iran has been bolstered by China’s mediation in healing relations between Saudi Arabia and Iran amongst the unstable Middle East setting.
The leadership of Islamabad’s energy sector has stated in secret that there is no longer any misunderstanding about the IP pipeline. They claim that there is now enough certainty in the key areas to move forward with the project.
But since the composition of Prime Minister Shehbaz Sharif’s cabinet and the minister of petroleum’s portfolio are still up in the air, nobody, not even the Petroleum Division’s spokesperson, seems willing to weigh in on the latest developments and prospects for the IP pipeline. Sensitivities surrounding the subject may be the cause of this hesitation to talk.
The CEO and managing director of Inter State Gas Systems Pvt Ltd (ISGS), the business in charge of constructing the pipeline, Nadeem Javed Bajwa, is unreachable in the meantime, despite repeated attempts to get in touch with him to get his opinion.
Many believe that after the tit-for-tat missile attacks with Iran, Pakistan, then led by the caretaker government, hurriedly chose to move forward with building the pipeline. Though Iran and Pakistan’s tensions have since subsided, worries over the possibility of a $18 billion fine for not finishing the IP project on time continue.
Senior individuals within the energy industry have revealed information indicating that the ISGS has been given project responsibilities. Additionally, it has been decided that funds from a special fund created just for this purpose would be used to pay for the building costs.
The government enforced the Gas Infrastructure Development Cess Act on enterprises to raise money internally for the purpose of bolstering and developing Pakistan’s gas infrastructure during the previous PPP administration (2008–2013). In spite of opposition and legal challenges, insiders disclosed that the government raised over Rs330 billion with this gas tax.
They said that there are reports that the government has released and allotted Rs42 billion ($152 million) for the project’s construction.
According to a senior ISGS official, “the long-delayed project is now being prioritised owing to the widening demand/supply gap and the cost-effectiveness of piped gas compared to LPG imports.” “The Special Investment Facilitation Council (SIFC) fully supports us,” he continued.
The IP gas pipeline would be finished if Pakistan prioritized its own interests, according to former foreign secretary Salman Bashir.With Iran’s vast gas reserves and our urgent demand, there’s no need to wait. It is essential to prioritize connections with neighbors in foreign policy,” he emphasized.
During a private session, one of the PML-N economic team members emphasized a crucial point: “The IP gas pipeline is still blocked by US sanctions against Iran.” Significant obstacles would need to be overcome for any bank financing the IP initiative to have its transaction cleared, especially in New York.
“We constructed the Iran-Gwadar energy transmission line from the ground up under the PDM Govt (2022–2023), which was an example of innovative problem-solving made possible by a comparatively small financial expenditure. The IP pipeline project is currently using this transmission line type, albeit with a much smaller scope—it will only be 80 km long and stay inside the nation—having been reduced from 2,775 km.
The project’s timeline may have been affected by the impending possibility of Iranian fines. However, there is an opportunity to get around possible US penalties by breaking the project up into smaller, more manageable chunks.
The Planning Commission’s previous head economist, Dr. Nadeem Javed, emphasized the dangers of moving forward with the Iran-Pakistan gas project. “It is unlikely that such geo-economic and political initiatives can be carried through to their logical conclusion given the volatility in foreign exchange situation and our consequent reliance on the International Monetary Fund.”
