Iran gas pipeline: Act of war an ‘excusing event’

The move is apparently to seek a force majeure clause in case the seller country, Iran, is faced with an armed conflict or a war.

Legal experts have recommended that Pakistan could consider this amendment as it covers armed conflicts between states rather than groups within a state and it has a material impact on gas supplies or off takes by the seller or the buyer.

A meeting of a sub-committee of Pakistan’s Economic Coordination Committee on gas import projects agreed to this proposal and recommended that the government should negotiate with Iran on the basis of suggestions made by legal experts.

After agreeing on a gas price formula on October 23, 2007, Pakistan and Iran had agreed in principle to sign the gas sales and purchase agreement for the USD 7.4 billion project in the next two months.

However, many amendments, proposed by Iran and India, have delayed the signing of the agreement for an indefinite period.

The latest amendment proposed by Iran requires further negotiations between the contracting countries and will further delay the signing and implementation of the agreement, the sources said.

Domestic gas reservoirs in Pakistan have almost depleted and the demand for gas is on the rise due to economic growth. The supply-demand gap is expected to be 26 mmscmd in 2011-12, 77 mmscmd in 2015 and 293 mmscmd in 2025.

If the agreement is implemented, Iran will start supplying gas to Pakistan by 2013. Pakistan and Iran will build the pipeline in their respective territories. The proposed 2,670-km pipeline project includes about 1,115 km in Iran, 705 km in Pakistan and 850 km in India.