February 21-2014
A Pakistan delegation has flown to Iran to try to change the timetable for building an Iran-to-Pakistan gas pipeline—and save Pakistan from penalty payments.
Under the Gas Sales Purchase Agreement (GSPA), signed with Iran in 2009, the first flow of gas to Pakistan was to start by December 31, 2014. But due to lack of funds, Pakistan is not building the portion of the pipeline on its side of the border, so that deadline is now impossible.
Failure by one of the parties leads to penalties equivalent to the price of the minimum contracted daily gas deliveries. That comes to $3 million for every day’s delay in completion of the project.
Iran can also claim billions of dollars in compensation for any breach of contract.
Iranian Oil Minister Bijan Namdar-Zanganeh said several weeks ago that he knows the deadline cannot be met and he knows Pakistan cannot pay the penalty either. So, a change in the deadline is expected.
Iran has laid the pipeline on its side of the border almost to the Pakistani border. But the pipeline is not going to waste. It supplies cities, towns and villages all across southern Iran with gas.