ISLAMABAD - Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi surprised the Upper House of Parliament on Tuesday by saying Pakistan may not go ahead to complete the Iran-Pakistan gas pipeline project due to the international sanctions imposed on Iran.

He, however, said the government has no intention to dump the important project.

"There is no proposal under consideration of the Government of Pakistan to abandon the Iran-Pakistan gas pipeline project. Pakistan is, however, unable to undertake the construction of the pipeline due to the international sanctions on Iran," Abbasi told Senate during the question hour on Tuesday.

Elaborating his standpoint, the federal minister said, commercial agreement signed between the two countries has a laid down procedure for different eventualities including negotiations between parties, arbitration, penalties and termination, he said.

He told the Senate the total cost of the project as per Bankable Feasibility Study estimated in 2012 is around $1.86 billion.

Iran has already completed the 900 km gas pipeline from the South Pars gasfiled up-till lranshehr and the work on remaining 250 km of the pipeline is likely to start soon.

The minister added that Pakistan has been able to complete phase-I of the project, which includes completion of the front-end, engineering & design, detailed route survey, social and environment impact assessment study, and feasibility study. The concrete markers have been installed along the whole route and land acquisition process has been initiated.

In phase II, the federal minister elaborated, the land acquisition process will be completed and construction of the pipeline will start once the EPC contract is finalized and financial close is achieved that is unlikely.

"It is likely that the financial close cannot be achieved due to international sanctions on Iran. We can't go ahead to complete this project until sanctions on Iran are over," the minister said.

He also said that in pursuance of recent meetings with Iran an experts group has been formed to formulate workable Implementation Schedule. Pakistan is facing Force Majeure type situation and currently engaged with Iran as per the provisions in the agreement.

The minister even surprised the Senate saying even Iran is yet to develop 'Paras Gasfield' from which it intends to provide gas to Pakistan.

"Even Iran is yet to develop the Paras Gas field. We assume, Pakistan-Iran gas pipeline project may take years to complete," said the minister.

He was responding to a question asked by a Senator whether there is any proposal under consideration of the government to abandon the Iran-Pakistan gas pipeline project, if so, what are its reasons and the legal implications of abandoning the said project and penalties in dollars likely to be imposed on Pakistan in such case.

Replying to another query, the Federal Minister said Pakistan may import electricity from Iran as this project is not linked with the sanctions.

Meanwhile, Senate was told the Governments of Pakistan and State of Qatar have been in discussion for import of LNG, however, it will take time for both the sides to sign an agreement.

The minister hinted that Pakistan may consider to import LNG from two countries including Qatar and another one from Middle East.

"Pakistan State Oil Company Limited and Qatar Gas Operating Company Limited have been nominated by respective governments to negotiate import of LNG from Qatar. The government also intends to invite open tenders for procurement of LNG. Keeping in view a huge volume of import of LNG, Pakistan may think to import some portion from other friendly country too," the minister said.

Meanwhile, the Senators got surprised to know how a Managing Director of PSO has been drawing a huge sum of two million rupees as monthly salary.

When asked, the minister told the House that the PSO Board determined two million as salary, allowances and other benefits in its meeting held in February 2012 in respect of Naeem Yahya Mir, former MD PSO. The ministry reduced this to 1,651,000 in comparison to previous MDs pay package of Rs.1,541,000/- approved in 2009 (an increase of around 7 per cent) which was concurred by Finance Division and finally approved by Prime Minister.