The Pakistani government has approved the initiation of construction on its portion of the Iran-Pakistan gas pipeline to alleviate the country's escalating energy demands amid financial challenges.

The approval, long overdue after several years of delay, was sanctioned by the CCoE of the interim government. This decision was made shortly before the transition to the new government following the February 8 elections.

According to an official statement, the Pakistan government has approved the commencement of construction work on its section of the Iran-Pakistan gas pipeline. The decision follows a recommendation from the Petroleum Division, with the committee endorsing the project's initiation.

The initial phase will involve construction from the Pakistan-Iran border to Gwadar, a port city in Balochistan province. The statement emphasized that all relevant divisions have expressed support for advancing the project to ensure gas supplies meet the country's growing energy demands.

Pakistan's Interstate Gas Systems (Pvt) Ltd is tasked with executing the project, financed by the Gas Infrastructure Development Cess. The project's significance lies in bolstering Pakistan's energy security and boosting local industry confidence with enhanced gas supplies.

It is expected to drive economic activity in Balochistan, thereby contributing to Pakistan's overall economic growth. The project's initiation follows years of delay, prompted by concerns over a potential USD 18 billion penalty for project completion delays. Iran's extension until September 2024 aims to prevent international litigation.

Experts warn that diplomatic tensions between Pakistan and Iran may escalate if legal action is pursued by Iran to safeguard its rights regarding the pipeline project.

Originally conceived as an India-Pakistan-Iran gas pipeline, the project later transitioned into a bilateral endeavour between Pakistan and Iran after India's withdrawal.

Despite facing US sanctions related to Iran's nuclear program, Pakistan has opted to advance with the construction of the IP gas pipeline within its territory to honour its commitment to Tehran.

In March 2013, Presidents Zardari and Ahmadinejad launched the Iran-Pakistan gas pipeline near Iran's Chabahar port, costing USD 7.5 billion. This marked the start of the project following a Gas Sales Purchase Agreement, binding Pakistan to begin construction on its part.

However, Pakistan faced significant obstacles in fulfilling its commitment, primarily due to pressure and sanctions imposed by the US on Iran. Despite Iran's completion of its portion of the pipeline, Pakistan failed to proceed with construction on its side.

Last May, Pakistan's Public Accounts Committee disclosed that the country risked incurring a substantial penalty of USD 18 billion if it failed to advance with the Iran-Pakistan Gas Pipeline project.

Image source: Outlook India