Pakistan has formally conveyed to Iran that it cannot pursue the gas pipeline project as of now because of the threat of US sanctions over Tehran's nuclear programme.
Pakistan also sought an extension in the project deadline in a last-ditch attempt to avoid penalty.
According to the Express Tribune, sources said that the government does not want to shelve the project and want to wait for normalisation of relations between Iran and the United States in the wake of a deal between Tehran and global powers over Iran's nuclear programme.
This could clear the way for pressing on with the gas pipeline.
A Pakistani team met officials in Tehran recently, where it called for extending the deadline for completing the Iran-Pakistan (IP) gas pipeline project.
Under the schedule, first flow of gas must start in December 2014. In case of failure, Pakistan will have to pay a penalty of three million dollars per day under the Gas Sale and Purchase Agreement (GSPA), the report said.
The delegation, led by Petroleum Secretary Abid Saeed, cited possible US sanctions for the delay.
Iranian officials said they would respond to the request after consulting relevant authorities, sources said.