Pakistan committed to completing Iran gas pipeline project

Pakistan is committed to building a multi-billion-dollar gas pipeline from neighbouring Iran but the threat of international sanctions makes the task difficult, the South Asian nation's petroleum minister said on Friday.

The comments follow remarks last month by Iran's oil minister that the country would probably abandon the contract, prompting speculation that the two sides had decided to ditch the project altogether.

"There is no decision to shelve anything, there is no decision to delay anything, but the constraints remain," Petroleum Minister Shahid Khaqan Abbasi told Reuters in an interview in Islamabad.

The $7.5-billion project has faced repeated delays since it was conceived in the 1990s to connect Iran's giant South Pars gas field to consumers in energy-hungry Pakistan and India.

Pakistan has pursued the pipeline as a way of alleviating severe energy shortages that have sparked violent protests and crippled the economy. At the same time, Islamabad badly needs the billions of dollars it receives in US aid.

The United States has steadfastly opposed Pakistani and Indian involvement in the project, saying it could violate sanctions imposed on Iran over nuclear activities Washington suspects are aimed at developing an atom bomb. Iran denies this.

"There are constraints with the construction of the pipeline," Abbasi said. "There is a threat of sanctions, either U.S. or U.N., and probably EU also. That limits what options we have with the construction of the pipeline.

"We are really hopeful that construction should start soon, as soon as these issues are resolved."

India, unlike Pakistan, quit the project in 2009, citing costs and security issues - a year after it signed a nuclear deal with Washington.

Pakistan, for its part, has made little progress on its section of the line for lack of funds and warnings it could be in violation of U.S. sanctions on Iran, which sits on the world's largest reserves of gas.

"The moment we connect the gas, the sanctions hit," Abbasi said, adding that the sanctions would particularly affect the equipment procurement process and other technical issues.

"We can construct the pipeline right up to the last metre, but the moment we connect, the sanctions are coming."

Iran has spent hundreds of millions of dollars and nearly completed the 900-km (560 mile) pipeline to the Pakistan border.

Under the contract, Iran is supposed to export 21.5 million cubic meters of gas per day to Pakistan from next year.

The cost of the Pakistani section of line is estimated at around $2 billion and Abbasi said Pakistan was ready to finance its part on its own.