ISLAMABAD: Pakistan has not scrapped a multi-billion-dollar gas pipeline project with Iran but was trying to come up with “creative solutions” to ensure the project could be completed while avoiding US sanctions, petroleum minister Dr. Musadik Malik said on Wednesday.
In written testimony to parliament last week, Malik said Pakistan had issued a Force Majeure and Excusing Event notice to Iran under the Gas Sales and Purchase Agreement (GSPA), under which Pakistan’s obligations under the GSPA would be suspended as it was unable to fulfil its part of the bargain due to US sanctions, thus pushing the project's completion by more than a decade.
Force Majeure is a clause included in contracts to remove liability for unforeseeable and unavoidable catastrophes that interrupt the expected course of events and prevent participants from fulfilling obligations.
The notice, issued ten years ago, was rejected by Iran. Pakistan then negotiated extensions and got two of five years each. The last extension ends in March 2024.
“We have not scrapped the project, rather are moving forward very aggressively,” Malik told reporters in Islamabad. “I just want to clarify that we basically had done Force Majeure about 10 years ago. Because of the [US] sanctions, we could not start or initiate the pipeline but the Iranian side did not agree on it [Force Majeure notice … We got two waivers of 5 years each, so we got a waiver of 10 years to negotiate further.”
Discussions to build the 2,775-km pipeline began in 1995, but it has yet to be completed mainly due to a lack of funds in Pakistan and complications posed by US sanctions over Iran’s nuclear activities. Under an agreement signed between the two countries in 2009, the pipeline project was to be completed by December 2014 and would deliver 21.5 million cubic meters (760,000 million cubic feet) of gas per day to Pakistan. Construction would use a segmented approach, where Iran would lay down the pipeline on its side, and Pakistan was supposed to reciprocate on its territory.
Malik said both countries were trying to come up with a solution to the problem, complicated by the fact that Iran faced sanctions from both the US and the United Nations. He said Islamabad was using “creative thinking” and all legal instruments at its disposal to ensure Pakistan was not slapped with sanctions in going ahead with the pipeline project.
“We are trying to come up with creative solutions,” Malik said. “Our perspective is very clear, that we need that [Iranian] gas but do not want to be sanctioned.”
Azerbaijan, Türkiye, Iraq, and other countries importing oil products from Iran had received waivers but Pakistan was yet to get one, the minister added.
Replying to a question about possible penalties if Pakistan missed the March 2024 deadline, the minister said penalties would apply only if one of the parties to the contract took the matter to court.
“This is a take-and-pay payment and the penalty will be decided by the court if any side takes the issue to the litigation,” he said, “and we are trying that the issue should not go to that stage.”
