Pakistan, Iran look to revisit gas pipeline agreement

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Islamabad: Pakistan has shared with Iran amendments to gas sale and purchase agreement (GSPA) to extend implementation schedule and revise pricing under the $1.35-billion gas pipeline project.

A senior government official on Thursday told Dawn that the Economic Coordination Committee (ECC) of the Cabinet has not yet allowed the Ministry of Petroleum and Natural Resources to start formal negotiations with Iran over fresh pricing.

He said the ministry requested the ECC in July this year to revive a committee to start formal talks and “we are still waiting for the approval”.

The petroleum ministry told parliament a few days ago that for the Iran-Pakistan (IP) project to be implemented in the extended period, “amendment to the GSPA was required”. It said a draft amendment had been shared with Tehran that agreed to negotiate it along with some other changes.

The official explained that the two key amendments were required to be made in the GSPA that had been “under suspension” for a few years. These proposed changes related to extension in timelines under the original agreement Pakistan should have completed the pipeline on its side by Dec 31, 2014 and gas flows should have started with effect from Jan 1, 2015.

Secondly, the pricing formula has to be revised based on latest market situation, prevailing prices from competitive sources and international best practices. Both Tehran and Islamabad wanted extension in dates and prices that would trigger a series of actions in line with best international practices.

The talks on the project were revived after a few years of suspension in March this year during the Iranian president visit to Pakistan. The two sides agreed to GSPA amendment for extension of time to finalise workable implementation schedule, price negotiation as per review clause in GSPA and Iranian proposal regarding amendments to the GSPA.

Iran has told Pakistan that the pipeline segment on the Iranian side will take about one-and-a-half years to complete.

Pakistan has stressed the need for setting the right timelines targeting early completion yet adequate provisions and flexibility for long-term measures and all eventualities towards achieving an amiable financial closure and construction.

Pakistan is currently building the 700-kilometre Gwadar-Nawabshah gas pipeline through Chinese assistance.

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