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Pakistan, Iran sign major gas pipeline agreement

world Updated: May 29, 2010 02:18 IST

Pakistan and Iran on Friday signed a "sovereign guarantee" agreement paving the way for the completion of a 7.5-billion-dollar gas pipeline project within the next four years.

The 900-kilometre (560-mile) pipeline will be between Asalooyeh, in southern Iran, and Iranshahr, near the border with Pakistan, and will carry natural gas from Iran's South Pars field.

Pakistan petroleum minister Syed Naveed Qamar told reporters after a signing ceremony in Islamabad that originally the pipeline was planned between Iran, Pakistan and India, but the latter withdrew from the project last year.

"I am extremely pleased that after 17 long years this project is finally starting. It would help us generate energy for our industrial growth," Qamar said of the Gas Sale and Purchase Agreement (GSPA) between the two countries.

Qamar added that "Iran had assured us that they would complete the project between two-and-half to three years, ahead of schedule."

The imported natural gas -- whose volume is estimated at nearly 20 per cent of Pakistan's current gas production -- will be dedicated to the power sector.

Electricity generation through gas would result in "significant" annual savings when compared with other fuels, a petroleum ministry statement said.

Supply is contracted for a period of 25 years, the statement said, renewable for another five years.

"While all other CPs (Conditions Precedent) of the GSPA are completed, the project is now ready to enter into its implementation phase," the ministry statement said.

"As per current project implementation schedule, the first gas flow is targeted by end 2014.

"The capital cost for the Pakistan section is estimated at 1.65 billion dollars."