ISLAMABAD, Nov 26: After weeks of uncertainty, the Iran-Pakistan gas pipeline project got a fresh impetus on Tuesday when the two countries agreed to expedite negotiations on gas price and formulate a fresh implementation schedule.

A government official told Dawn that a technical delegation of the Ministry of Petroleum and Natural Resources and the Interstate Gas Company (ISGC) would visit Tehran to hold talks with the Iranian government and Tadbir Energy Gaspar, the project contractor, soon after the return of Prime Minister’s Adviser on National Security and Foreign Affairs Sartaj Aziz, who is currently in Iran to attend a meeting of the Council of Ministers of the 10-member Economic Cooperation Organisation (ECO).

It will be followed by a meeting of energy ministers of the two countries for which dates and venues are being finalised. The official said the two sides would immediately start fresh negotiations on gas pricing and work out a fresh project implementation schedule to make up for the time wasted in political transitions in the two countries and uncertainties associated with the US-Iran nuclear talks.

“Iran and Pakistan have decided to fast-track discussions on the gas pipeline project in order to formulate a roadmap and a more realistic schedule for the implementation of this important project,” a foreign ministry spokesman said.

It was an “important outcome”, he said of a meeting between Sartaj Aziz and Iranian Foreign Minister Dr Mohammad Javad Zarif in Tehran on Tuesday. “It was agreed that comprehensive technical commercial proposals on the pipeline project would be discussed in Tehran between Pakistan’s ISGC and Iran’s Tadbir Energy in the first week of December. It will be followed by ministerial level discussions,” he added.

The spokesman said the two ministers had discussed bilateral cooperation and regional issues, expressing satisfaction over the friendly and cordial relations between Iran and Pakistan. They stressed the need for putting greater focus on bilateral economic relations and agreed to hold the next round of Iran-Pakistan Joint Ministerial Commission in Tehran early next year.

Iran recently expressed its willingness to review gas price for the project, as required under the bilateral gas sale and purchase agreement (GSPA). More importantly, the two sides have to agree on a revised implementation schedule given the fact that more than six months have been wasted because of political transition in the two countries and uncertainties over impact of US sanctions on the pipeline project.

The official said the GSPA provided for review of price before actual gas flows under the project on the desire of any party and on the basis of any alternative fuel price. Under the agreement, the first gas delivery to Pakistan should start by Dec 31 next year. The two countries are responsible for completion of pipeline within their territories. Failure on part of a party entails penalties equivalent to the price of daily gas quantities.

The price under the original agreement had been signed at about 78 per cent of furnace oil. Subsequently, Pakistan signed another agreement with Turkmenistan for the Turkmenistan-Afghanistan-Pakistan-India gas pipeline project envisaging a delivery price in Pakistan at about 69 per cent of furnace oil, providing a comparative fuel price with an annual difference of about $1 billion. This price differential has to be narrowed down between Pakistan and Iran.

But the more critical issue to be sorted out is the financing arrangement to complete 781km pipeline inside Pakistan. Iran had offered $500 million for it, but since the interest rates were seen on the higher side by Pakistan, it sought higher financial support from Iran to avoid US sanctions on Islamabad.

With a breakthrough between the United States and Iran over the latter’s nuclear programme and resultant release of Tehran’s $7 billion foreign exchange assets, Pakistan and Iran have to work out a fresh project implementation schedule on the basis of actual ground situation and agree on financial arrangements.

The two sides also have to renegotiate terms for Pakistan’s sovereign guarantee for Tadbir Energy’s financing to formalise its agreement for pipeline construction.