ISLAMABAD: With millions of dollars in potential penalties looming, the government has constituted a high-powered committee to find a “mutually acceptable” way out of the decades-old impasse over the Pakistan-Iran gas pipeline, as it weighs the cost of penalties against the country’s growing energy needs.

Petroleum Minister Ali Pervaiz Malik told the Senate on Tuesday that Prime Minister Shehbaz Sharif had set up the committee to examine the project’s legal, financial and energy dimensions and recommend a way forward “in Pakistan’s national interest”.

Raising an attention notice, Senator Talha Mahmood noted that the project had been delayed for two decades and that Iran had already laid the pipeline up to the Pakistani border. He asked whether Pakistan was ready to receive Iranian gas once sanctions were lifted and how much work had been completed on its side of the pipeline.

“Can Pakistan immediately integrate Iranian gas into its system? How long will it take to make the pipeline operational after sanctions are lifted? What preparations has Pakistan made to receive the gas?” he asked.

The senator further asked whether the infrastructure for transporting Iranian gas had been completed and what practical progress had been made on the project.

Malik said the matter had gone into arbitration in Paris under the Gas Sales Purchase Agreement signed between the two countries in 2009.

Under the agreement, Pakistan was to complete its 781km pipeline by December 2014. The deadline was later extended, but Islamabad could not begin construction on its territory due to US sanctions and a lack of financing. Iran completed its section years ago.

In 2023, Tehran served a formal notice seeking damages for the delay, with reports suggesting the claim could run into billions of dollars.

The dispute is now being heard by an international arbitration tribunal in Paris.

“The committee is looking at the potential liability facing Pakistan, the implications of litigation and the country’s future energy requirements,” the petroleum minister told the house. “These factors will help determine the way forward on the project.”

He added that the government wanted to avoid further complications from litigation and was therefore pursuing a negotiated settlement with Tehran.

“Iran is a brotherly country and the leadership of the two countries remains engaged in efforts to reach an amicable settlement acceptable to both sides,” the minister said.

Malik noted that Iran had already made “substantial physical progress” on its side of the pipeline, having brought gas from the South Pars field to a major city near the Pakistani border.

The petroleum minister also addressed concerns over gas supply problems in Balochistan. He said the prime minister had directed him to engage with provincial stakeholders.

He informed the house that another high-level committee, headed by Deputy Prime Minister and Foreign Minister Ishaq Dar, was examining Balochistan’s gas-related problems, including technical faults and payment issues.

In May 2009, Pakistan and Iran signed an agreement for the supply of 750 million cubic feet per day (mmcfd) of gas for 25 years from Iran’s South Pars gas field.

Both countries were required to implement the project in their respective territories. According to the agreement, the project was to start supply by January 2015.