Pakistan seeks 10-year extension from Iran on gas pipeline amid $18 billion arbitration risk: report

Pakistan has asked Iran to grant a fresh 10-year extension until 2035 for the implementation of the stalled Iran-Pakistan gas pipeline, as Islamabad faces a potential $18 billion penalty in international arbitration, citing continued US sanctions on Tehran as a key constraint, The News reported. 

Pakistan is currently contesting the case initiated by Iran before a Paris-based arbitration forum under French law, while simultaneously pursuing diplomatic engagement to reach an out-of-court settlement. A Ministerial Oversight Committee, headed by Deputy Prime Minister and Foreign Minister Ishaq Dar, is examining multiple options to limit Pakistan’s financial exposure.

Federal Minister for Petroleum and Natural Resources Ali Pervaiz Malik said an oversight committee was reviewing available options, adding that while legal proceedings were continuing, no breakthrough had yet been achieved on the diplomatic front.

Iran initiated arbitration proceedings in September 2024, alleging that Pakistan failed to construct its segment of the pipeline despite repeated deadline extensions and seeking damages of $18 billion under the Gas Sales Purchase Agreement.

Pakistani officials, including the Attorney General and the legal team of Inter-State Gas Systems, supported by the Petroleum Division, have argued that Pakistan was unable to meet its obligations during the extended 180-day period due to international sanctions imposed on Iran.

Officials expect the arbitration ruling in 2027 or 2028. However, sources said both sides are also engaged in high-level diplomatic contacts aimed at resolving the dispute outside the legal process. Pakistan is seeking a further 10-year extension, although no formal proposal has been submitted, indicating that discussions are taking place at the leadership level.