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Two contentious issues: Pakistan, Iran agree to renegotiate GSPA

Iran and Pakistan have reportedly agreed to renegotiate the Gas Sales Purchase Agreement (GSPA) on two contentious issues: gas price and the funding for the pipeline in the Pakistan territory. Sources privy to developments told Business Recorder here on Tuesday that the Petroleum Minister, Shahid Khaqan Abbasi who was in the US on an official visit, had now arrived in Turkey to meet with his Iranian counterpart to further discuss the issues relating to the IP gas pipeline.

Abbasi was scheduled to visit Iran last month to discuss the IP project with the relevant Iranian authorities, but the visit was delayed. Iran it is said to have agreed to renegotiate the price which was last set at 87 percent of crude oil but insists that it will not be able to extend a loan greater than 500 million dollars to lay the pipeline in the Pakistan territory.

If any country opts to withdraw from the project or cause a delay the penalty clause of the agreement stipulates that the country will have to pay a daily penalty of $1 million extendable to $3 million per day. According to the official, both Iran and Pakistan are serious about implementing the project. When contacted, an official of National Engineering Services Pakistan (NESPAK) associated with the project said, "We have not received any negative signal from the government on the project but work on it is suspended. We are waiting for directions from the concerned authorities, while on the Iranian side work is in progress."

According to Khaqan Abbasi, IP gas will cost $12 per Million British Thermal Unit (MMBTU) which as compared with local gas price of $4.5 per MMBTU is almost three times high, therefore the Pakistani government had decided to renegotiate gas price with the Iranian authorities. Sources said the current price is due to the delay in the construction of the gas pipeline as in 2006-07 Iran was willing to export gas to Pakistan at $3.5 per MMBTU.

According to Dr Asim Hussain, former Advisor of Prime Minister on Petroleum and Natural Resources, international powers as well as regional powers are not willing to allow Pakistan to complete IP project, which will bring 750 Million Cubic Feet per Day (MMCFD) gas for the country and help reduce 50 percent of the current energy crisis. Former PPP-led federal government imposed Gas Infrastructure Development Cess (GIDC) to bear the cost of imported gas projects and when the PPP completed its five-year term in government there were Rs 50 billion collected on account of GIDC. As per plan, IP gas was to be exclusively used for power generation which would produce per unit of electricity at Rs 12 and 750 MMCFD gas is sufficient to produce 4,000 to 4,500 megawatts of electricity.

Copyright Business Recorder, 2013


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