The Pakistan government has asked for a clarification from Iran after its Oil Minister publicly stated two days ago that the peace pipeline project was likely to be annulled.

Federal Minister for Petroleum Shahid Khaqan Abbasi on Friday said that there was an agreement signed between Pakistan and Iran for the gas pipeline and it cannot be called off unilaterally. The government had asked for a clarification and also a meeting to discuss the project and its future, he said. The meeting could be held later in November depending on when Iran responds.

He said that media reports cannot be the basis for judging if a project is called off or not and no official word had come from Iran on this. The pipeline project is facing flak for not negotiating a proper price for gas which is linked to international crude oil prices. There are provisions for heavy penalties if the Pakistan government does not fulfill its share of building the pipeline for which it had last month sought funds from Iran. Mr. Abbasi said these issues including the penalty clauses will have to be discussed when the meeting with Iran takes place.

On Thursday, the Pakistan government said it was committed to the project and was exploring all means of sourcing energy keeping in mind the acute shortage. This winter in Punjab for three months gas will only be supplied for cooking purposes and vehicles will not get compressed natural gas.

The government was confident of signing a construction contract for the pipeline but that will remain in limbo till the Iran government gets back on the issue. Mubin Saulat, managing director of Interstate Gas Systems Limited, a public sector company, said while most of the 1,100 km portion of the pipeline in Iran is complete, financing the project for Pakistan was a challenge. But there were other positive developments in the project for instance, the design was completed.

While the construction should have started by now, he said it was not was rocket science and if everything falls into place, the project could be completed as scheduled next year end. “It's challenging but not impossible,” he added.

He said Pakistan is also looking at its huge gas reserves in Sui in Balochistan and in Sindh and if the investment environment is good then there may not be a need for imported gas. At present the production of gas is 4 billion cubic feet a day (BCFD) while the demand is 6 BCFD. This could double in 10 to 15 years time. Pakistan uses gas — the bulk of it for domestic use but 50 per cent of its energy comes from natural gas. According to the agreement with Iran signed in 2009, Pakistan should get 1 BCFD from the Iran Pakistan pipeline project. This along with the proposed Trans Afghanistan Pipeline or TAPI pipeline in which India is involved, should be able to meet its shortage of 2 BCFD. The company was also pinning its hopes on the TAPI project which if completed in the next four to five years could deliver 1.3 BCFD.