Pakistan and Iran have signed an agreement for supply of gas from the Islamic republic through the USD 7.5—billion pipeline to be completed by the end of 2014.

The “sovereign guarantee” agreement was signed by National Iranian Oil Company Managing Director S R Kasaezadeh and Pakistan’s Petroleum Joint Secretary Irshad Kaleemi yesterday.

The cost for the Pakistani section of the pipeline is estimated at USD 1.65 billion.

Under the gas sale and purchase agreement, Pakistan will import 750 million cubic feet a day (mmcfd) of gas and there is a provision to increase the flow to one billion cubic feet a day (bcfd).

The imported gas will be about 20 per cent of Pakistan’s current gas production and the agreement is valid for a period of 25 years and renewable for another five years.

The Iranian gas will be provided to Pakistan’s power sector to generate about 5,000 MW of electricity, an official statement said.

This will result in “significant annual savings” when compared with alternative fuels like LNG and coal, it said.

As part of the “conditions precedent” to be completed by the two sides to make the agreement effective, the Pakistan government will provide a “performance guarantee” on behalf of the InterState Gas Company.

Officials said that since all other “conditions precedent” of the pact have been completed, the project is ready to be implemented.

The venture will be funded through public—private partnership.

Petroleum Minister Naveed Qamar said the construction of the pipeline will create jobs, provide vocational training and develop backward areas of Balochistan and Sindh provinces.

The use of natural gas as fuel will ensure substantial carbon credits.

Pakistan has maintained that provisions included in the agreement for the pipeline will allow India to join it at a later stage if it wants to.

The pipeline was originally envisaged as a three—nation venture including India.