ISLAMABAD: The Pakistani government is considering to engage an international law firm to explore options to seek the United States (US) sanction waivers to complete a natural gas pipeline project from neighboring Iran, a Pakistani government official said on Tuesday.
The development comes days after US Assistant Secretary of State Donald Lu told a Congressional hearing that President Joe Biden’s administration was working to prevent the Iran-Pakistan gas pipeline project, which the two countries agreed to in 2009.
However, Prime Minister Shehbaz Sharif’s government is planning to convince the US administration through “logical reasons” to secure waivers to complete the project which was essential to fulfil Pakistan’s energy needs.
“We are exploring different options at the moment to see as to how Pakistan could complete the project without facing US sanctions,” an official of the Pakistani energy ministry, who requested anonymity, told Arab News.
“One of the options is to hire an international legal firm like we did in the past to come up with a cogent plan to avoid US sanctions on the project.”
In July 2019, Pakistan hired a French law firm, Gide Loyrette Nouel, to deal with Iranian threat of moving an international court against Islamabad for its failure to execute the project and to find out a way if the project could be completed without attracting US sanctions.
Under an agreement signed between the two countries in 2009, the 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. It was to be constructed using a segmented approach, with both countries laying down the pipeline on their respective sides of the border.
“Nothing is finalized yet as different legal and diplomatic options are on the cards to go ahead with the project,” the official said. “Definitely, we will be taking this up with the US citing some logical reasons for the project’s importance to Pakistan.”
The project is expected to boost Pakistan’s energy security and strengthen the local industry that can be assured a sustainable and enhanced gas supply. The construction of the pipeline is also expected to catalyze economic activity in Pakistan’s southwestern Balochistan province.
Syed Atif Zafar, chief economist at the Karachi-based Topline Securities brokerage firm, said Pakistan would get relatively cheaper gas as compared to the imported Liquefied natural gas (LNG), if the project was completed.
“The energy shortages would improve besides saving some foreign exchange that we are currently spending on the LNG import,” he told Arab News.
Zafar said if Pakistan failed to complete the project, it would have to pay a daily penalty of $1 million to Iran starting from January 1, 2015 under a penalty clause of the bilateral agreement.
“Pakistan cannot afford this penalty in any way, so we will have to find out a way to complete the project,” he added.
Tahir Abbas, head of research at the Arif Habib Limited securities and brokerage firm, said Pakistan’s total gas demand was around 6,000 million standard cubic feet per day (mmcfd), while the local production was just 3,300 mmcfd, and the country was importing around 1,000 mmcfd of LNG to meet its demand.
“We have been purchasing the LNG at around $12 per mmbtu and if Iran-Pakistan gas pipeline project is completed, we can get the gas at around $8 per mmbtu,” Abbas told Arab News.
“The IP project will help us save a lot of precious foreign exchange, besides supplying cheaper gas to industrial and residential consumers.”
