Pakistan Seeks Deep Cuts in Iran Gas Prices to Revive Pipeline Project

Pakistan is seeking a significant reduction in the price of Iranian gas and lower supply volumes under the stalled Iran-Pakistan pipeline project. The move aims to revive the long-stalled project, which has been delayed due to U.S. sanctions risks.

The current price of Iranian gas is estimated at $10.60 per million British thermal units (mmBtu), with transportation costs adding an additional $1.25 per mmBtu. Pakistan is proposing a new formula linked to Brent crude at 6.11% of the benchmark price, plus $1.

At Brent prices of $60, $70, and $80 a barrel, the proposed formula would put Iranian gas at $4.67, $5.28, and $5.89 per mmBtu, respectively. These prices are lower than comparable liquefied natural gas (LNG) costs under Pakistan State Oil's second sale and purchase agreement.

Pakistan is also seeking to reduce the volume of gas it would receive under the project. The pipeline was designed to supply around 750 million cubic feet of gas per day, with an estimated project cost of $2.5 billion.