Iran-Pakistan Gas Pipeline
By Alauddin Masood
Finally, Pakistan and Iran have agreed to give a concrete shape to the $7.5 billion Iran-Pakistan (IP) gas pipeline project with groundbreaking ceremony on March 11, this year. The presidents of both the countries will preside over the ceremony to be held at Gabd zero point on the Pakistan-Iran border.
Pakistan and Iran commissioned, February 27th, 2013 a joint contracting company to begin construction of the Pakistani section of Iran-Pakistan gas pipeline, within the next 15 months, despite US opposition to the project. Americans say that Pakistan should avoid any activity that would attract sanctions. Islamabad says that it will pursue the project regardless of US pressure, adding the gas is needed to help Pakistan overcome its energy crisis. On March 2, President Asif Zardari stated in Lahore that Pakistan is a sovereign and independent country and no power can hinder the completion of Iran-Pakistan gas pipeline project now.
Pakistan plans to import 21.5 million cubic meters of gas daily from Iran via the pipeline. The 781-km (490 miles) Iran-Pakistan (IP) gas pipeline stretches from Iran- Pakistan border to Nawabshah in Sindh. Tehran has agreed to provide Pakistan $500 million loan to partially finance construction of this section of the pipeline, which is estimated to cost $1.5 billion. Pakistan will pay the remaining cost from its own resources.
The pipeline, which is of great significance for the whole region, begins from Iran’s Assalouyey Energy Zone in the south and stretches over 1,100 km through Iran. Iran has almost completed the pipeline work in its territory. In Pakistan, it will pass through Balochistan and Sindh. However, officials say, the route may be changed if China agrees to join the project. If China supports the project, it will also strengthen Pakistan’s hand.
The provision for the change of route impels one to infer that Pakistan’s programme has not yet gone beyond paper work. Readers’ might recall that it was earlier envisaged that the IPI gas pipeline would start delivering the Iranian gas by 2012. However, various problems delayed the execution of this vital project. In 2008, India quit the Iran-Pakistan-India (IPI) gas pipeline project after 13 years. As regards Pakistan’s neighbouring country India, it appears, she had throughout been using TAPI and IPI pipelines as a bargaining chip to realize other options and goals. Dismayed with the Indian gas pipeline diplomacy, Pakistan finally decided in 2010 to unilaterally sign a deal for the import of Iranian natural gas. However, both the countries (Pakistan and Iran) have kept the option of other countries, tacitly India and China, joining in the IP gas pipeline project at a later date. After holding negotiations that spread over almost 17 years, Pakistan and Iran signed an agreement, on March 16th, 2010, in Istanbul (Turkey), whereby Iran agreed to supply gas to Pakistan. Understandably, the supply of gas from Iran will greatly help to overcome the shortage of energy in Pakistan. Under the agreement, Islamabad has agreed to extend the guarantee to Tehran that it will ensure unhindered gas supply to any third party, if it wishes to become part of the IP gas pipeline project at a later stage.
The Iranian gas will enable Pakistan to generate 5,000 MW of electricity. However, it would not be economically viable for domestic use because of its higher price. Iran is an energy giant with one foot in the Caspian Sea and the second in the Persian Gulf. It is beneficial both for Pakistan and Iran to enter into a buyer-seller relationship for natural gas that Iran has in abundance and South Asia Sub-Continent’s growing and energy starved economies desperately need.
Natural gas is transported either through overland or undersea pipelines in its natural state or as liquefied natural gas (LNG) in oil tankers. Liquefying gas and transporting it as LNG in oil tankers is a costly venture. For LNG transportation, the capital outlay would include an expenditure of over US$ two billion for a liquefaction unit, over US$ 200 million for each LNG tanker and over US$ 500 million for a re-gasification plant. Amongst the other two options, the on-shore route is more economical; while the offshore route for the transportation of Iranian gas to Pakistan was estimated to cost almost double the cost of the on-shore route.
As per on-shore route, the IP gas pipeline, with 42-inch diameter, will enter Pakistan from Gabd zero point on the border from where Pakistan section of the gas pipeline starts. From Makran coast, it would reach Nawabshah, through coastal highway, where it would be connected with the system of the Sui Northern Gas. Presently, Pakistan is facing a daily shortfall of over 400 mmcfd of gas, which is projected to increase to four billion cubic feet by 2025. To meet its growing gas needs, Pakistan has been considering four options for the execution of a gas pipeline project. These included: IPI gas pipeline, Turkmenistan-Afghanistan- Pakistan-India (TAPI) gas pipeline, Qatar-Pakistan under-sea pipeline and LNG pipeline.
Recently, efforts have been stepped up to revive TAPI gas pipeline project, which the US touts as an alternate source. However, progress on this project has been hampering for the last six years. In 2010, the cost of 56-inch diameter 1,435 km pipeline (from Turkmenistan to Multan) was raised to about $4 billion from $3.3 billion in 2004. The pipeline, which is to originate from Turkmenistan’s Daulatabad gas field, will run 145km in the host country, 735km in Afghanistan, 555km in Pakistan (up to Multan) under the preferred southern route via Herat and Kandahar. The Asian Development Bank, which has offered to provide technical support to the project, has concluded a thorough feasibility study which says that the inclusion of India will be of great benefit not only for the project but for all stakeholders. The projects are crucial for Pakistan to avert a growing energy crisis. The experts maintain that Pakistan’s future can be secured by meeting its energy needs adequately. According to conservative estimates, the country is presently suffering a loss of rupees 50 billion annually due to the continuing energy crunch, which Pakistan has been enduring for want of sound planning in the past. If plans to import gas for meeting the country’s needs for electricity and gas are not implemented immediately and its indigenous gas resources are not fully and expeditiously exploited, the loss can increase manifold.
Furthermore, the construction of IP pipeline will create job opportunities, vocational training and health facilities and social uplift in the backward areas of Balochistan and Sindh. Being an environmental friendly fuel, the natural gas fuel will also ensure substantial carbon credits.
As regards Pakistan’s neighbouring country India, it appears, she had throughout been using TAPI and IPI pipelines as a bargaining chip to realize other options and goals. Dismayed with the Indian gas pipeline diplomacy, Pakistan finally decided in 2010 to unilaterally sign a deal for the import of Iranian natural gas. However, both the countries (Pakistan and Iran) have kept the option of other countries, tacitly India and China, joining in the IP gas pipeline project at a later date.
The natural gas extracted from different gas fields contains traces of vapours of other combustible gases that have to be separated from methane gas before pumping it in to the gas distribution network. Liquefied Petroleum Gas (LPG) is the mixture of these separated gases. But, LPG plants have not been installed at many gas and oilfields in Pakistan and the impure gas, equivalent to 500 tons of LPG, is burnt in the air daily before pumping pure methane in gas distribution system. The daily loss of 500 ton of gas, at current rates, comes to about Rs.3 billion. However, according to experts, OGDCL has infrastructure and capabilities for substantially increasing its exploration activities and also the potential to make Pakistan self-sufficient in oil and gas within 10-15 years, if it adequately plans acquisition and training of additional technical manpower and equipment over a period of 5-8 years and productive wells are discovered. For realising this goal, it is, however, imperative for OGDCL to acquire the services of fully qualified and adequately experienced, motivated and conscientious Exploration and Production (E&P) management team, and allowing them the independence to make technical and financial decisions solely on merit and in the national interests, without unnecessary interference from official quarters, both upper and horizontal.
