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Islamabad

Pipe Dream

The viable option left to complete the Iran-Pakistan (IP) gas pipeline construction is to get a waiver for this project from the United States.

By Col. (R) Muhammad Hanif | April 2024


According to the Global Energy Monitor, the Iran-Pakistan (IP) gas pipeline, also known as the Peace Pipeline, emerged from a plan dating as far back as 1994, and the deal was signed between Pakistan and Iran in 2009. The project would bring gas from the South Pars Gas Fields through Balochistan to Nawabshah in Sindh province, where it will be connected to Pakistan’s Sui Southern network.

The IP gas pipeline with a 42-inch diameter is expected to provide 750 million cubic feet of gas per day to Pakistan for the next 25 years, facing a severe energy crisis and relying heavily on imported Liquefied Natural Gas (LNG). The project is also seen as a symbol of friendship and cooperation between the two neighboring countries.

The pipeline’s construction was planned to begin in 2012 and be completed by 2014. Accordingly, the project’s groundbreaking ceremony was jointly conducted by Pakistan’s then-President Asif Ali Zardari and then-Iranian President Mahmoud Ahmadinejad near Iran’s port city of Chahbahar in March 2013.

While Iran has already completed its part of the pipeline, with a length of 1100 kilometers, Pakistan has not yet started the construction of its 780-kilometer section, as the project has stalled a few times due to the risk of US sanctions on Iran, which is under pressure for its nuclear programme. To ease the pressure of energy shortage, Pakistan has resorted to importing LNG from Qatar and LPG from Russia, but at a much higher cost.

In September 2019, the Interstate Gas Systems (ISGS) of Pakistan and the National Iranian Gas Company (NIGC) signed a new agreement based on which Pakistan would be expected to construct its part of the project by February-March 2024, failing which it will be required to pay a hefty penalty of US$18 billion to Iran.

However, in August 2023, Minister of State for Petroleum Musadik Malik informed the National Assembly that Pakistan had suspended the completion of the pipeline until international sanctions on Iran were lifted and stated that the Government of Pakistan was engaged with the US authorities through diplomatic channels, to seek exemption for the project.

As per the Pipeline Technology Journal (PTJ) on 23 February 2024, the caretaker federal cabinet energy committee in Pakistan approved the construction of an 80 km section of the pipeline within Pakistan, extending, from the Iranian border to Gwadar, called Phase 1 of the project, possibly to avoid a potential 20 billion USD penalty. The project, expected to cost roughly $158 million, will be carried out by the private company Interstate Gas Systems, and funded by the Gas Infrastructure Development Cess.

The remaining part of the pipeline from Gwadar to Nawabshah will be constructed subsequently, for which Pakistan is looking at the Petronas of Malaysia and Gazprom of Russia as major international investors, and the governments of Sindh and Balochistan, Pak Petroleum, Oil and Gas Development Company, Sui Northern Gas Pipelines, among others, as domestic investors.

The construction of the IP pipeline is significant economically and strategically for Pakistan. Economically, it is very much a necessity for Pakistan to ease the pressure of using unaffordable high-price LNG and LPG and also to boost its industrial development with a cheaper fuel that will enable the industry to produce goods at a competitive price to substantially increase its exports and meeting its domestic demand of industrial goods.

If India, China, and Bangladesh decide to join this project later, then Pakistan can earn transit fees of about $1.8 billion annually. The pipeline construction will also help develop Pakistan’s Balochistan and Sindh and create more job opportunities in both provinces. The pipeline is also believed to enable the generation of 5,000 megawatts of electricity for Pakistan, which would help address electricity load shedding.


The IP pipeline is also strategically important, as it would be an excellent way to establish economic interdependence between Iran, Pakistan, and India if the last-mentioned were to become a part of the venture as it had initially planned. The pipeline will reduce regional tensions, which is expected to generate immense regional cooperation.

The threat of US sanctions is the primary cause of the delay in constructing the Pakistani part of the IP gas pipeline project. The US is encouraging Pakistan to import gas from Turkmenistan.

However, the threat of US sanctions is the primary cause of the delay in constructing the Pakistani part of the IP gas pipeline project. Although the US is encouraging Pakistan to import gas from Turkmenistan, where the US will invest in the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline project, and Pakistan is an interested party in that, but that depends on Afghanistan’s stability, which is uncertain. Hence, the IP gas pipeline project is seen as a viable project from a short-term perspective.

Thus, to quickly ensure the supply of Iranian gas to address Pakistan’s economic recovery issue, and the Iranian gas is much cheaper than the gas imports from Turkmenistan, constructing the IP gas pipeline is extremely important for Pakistan. However, the latest US-imposed energy sector sanctions, which ban companies from the US financial system if they continue to do business with Iran, are more severe.

Henceforth, the viable option left to complete the construction of the IP pipeline is to get a waiver for this project from the US. It is quite possible to convince the US on this account, as the US understands Pakistan’s troubled economic situation, which can be eased with the provision of Iranian gas. The Southern Gas Corridor has already received a waiver from US sanctions against Iran’s energy customers, an expected win for the project, designed to transport 16 Bcm/year of Caspian natural gas to Turkey and southern Europe while bypassing Russia. Despite sanctions, the US has also given a waiver to 11 countries, including Japan, India, and South Korea, to continue purchasing oil from Iran.

Therefore, getting an exemption from the US for the IP gas pipeline project is possible. Once Pakistan gets an exemption, investors like China and Russia will not hesitate to invest in the IP gas pipeline project. Hence, the prospects of the completion/operationalization of the IP gas pipeline project are not out of Islamabad’s reach if its diplomacy works well.

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