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Iran offers Pak huge discount in gas price

ISLAMABAD: In a major development, Tehran has extended offer of huge discount in gas price during peak hours in summer under Iran Pakistan gas pipeline deal which was signed in 2009, a senior official at Ministry of Petroleum and Naral Resources said.
“The offer came from the Iranian side during the visit of Iranian President to Islamabad when Pakistan aspired to re-visit the gas sales purchase agreement (GSPA) singed in 2009 with the focus on reviewing gas price downward. Iran had agreed to review the gas price downward.”
Now Ministry of Petroleum and Natural Resources will, the official said, send its expert delegation within days to Iran for re-negotiating the gas deal.
The official explained that during the last visit of Iranian President to Pakistan, the official told, both sides had proposed the agenda items for renegotiating GSPA including amendment on extension of time to finalize doable implementation schedule; price negotiation as per review clause in GSPA; and Iranian proposal regarding changes in the gas deal.
In addition, the Iranian side had also suggested revisiting the formula indexation from JCC (Japan Crude Cocktail) to Brent and also offered a discount for peak gas off takes in summer.
Under the existing GSPA, Pakistan was to get the first gas blow from Iran on January 1, 2005 and if it were failed then it will have to pay the monetary penalty of $1 million per day. Since the project got stalled on account of the UN, US and EU sanctions imposed on Iran for its nuclear ambitions which is why Pakistan failed to arrange in financing required to lay down the pipeline of 781 kilometres in its territory.
In case the price of Iranian gas was lowered to that of TAPI pipeline level, Pakistan would save about $1.5 billion over the life of the project as compared with the price earlier finalized under the IP-GSPA.
The Nawaz government has successfully so far managed to avoid the penalty of $705 million to be imposed by Iran as per the GSPA (gas sales purchase agreement) under IP gas pipeline and will avert the mammoth penalty of worth $1.183 billion by March 2018 which is close to the price of 700 kilometres Gwadar-Nawabshah pipeline that stands at $1.353 billion, a top official of the ministry of petroleum and natural resources.
As per GSPA signed with Tehran, he said, the IP gas pipeline was to come on stream by December 31, 2014 and under the penalty clause in case Pakistan fails by December 31, 2014 to lay down the pipeline from Pak-Iran border to Nawabshah, then the penalty clause would invoke automatically and Pakistan will have to pay $1 million a day to Iran.
However, the ugly development of being panelised didn’t happen as the government has successfully pitched an alternate project of Gwadar-Nawabshah pipeline which will be renamed as IP gas line once the sanctions imposed on Iran will be no more. The Gwadar-Nawabshah pipeline will definitely be completed by March 2018. However, its first target of completion is December 2017.
Pakistan factually got failed in the wake of inability to arrange the required finances for 781 kilometres pipeline on account of sanctions imposed on Tehran by UN, US and EU countries for Iranian’s ambitious nuclear program. The Nawaz government then came up with the innovative idea of constructing the 700 kilometre Gwadar-Nawabshah pipeline with the same specifications of IP gas pipeline agreed with Iran to avert the imposition of penalty.
The government successfully prepared its force-major case which was pitched before the top authorities of Iran telling them Pakistan has carved out a plan to lay down the 700 pipeline from Gwadar to Nawabshah with the diameter of 42 inches with the same specifications of IP gas line project agreed with Iran. And when the sanctions get waived off, then the pipeline will be extended backward from Gwadar to Iran by 81 kilometres to be connected to the pipeline in the territory of Iran.
The top mandarins also found that the pipeline Iranian authorities have constructed in their territory under umbrella of IP gas line is still away by 300 kilometres from Pak-Iran border meaning by that Iran has not so far done its own job. “The IP gas pipeline line under the agreement was to be built under segmented approach,” the official explained. Staff Reporter