India weighs the pipeline
odds By Siddharth Srivastava
NEW DELHI - Given current strategic
thought that inclines towards the US, New Delhi
would perhaps have been more comfortable had the
US$7 billion Iran-Pakistan-India (IPI) natural gas
pipeline been in abeyance for some time more.
While India does need energy sources
desperately, New Delhi could perhaps have been at
ease focusing on other sources, including new gas
finds in eastern India that can be gainfully
tapped for use by power and
fertilizer companies, the main consumers.
Washington opposes the IPI pipeline, given
its efforts to economically isolate Tehran due to
its steadfast independent nuclear program.
However, India's position has been
complicated by Pakistan, which has made it clear
that it will go ahead with the Iran-Pakistan
segment of the IPI if India does not oblige.
While energy access is a critical factor,
Islamabad, long used to being mollycoddled by
Washington, has been smarting under the US
turnaround that has seen India become its new
strategic partner in the region.
Apart
from business opportunities, Washington has
embraced India as the only country in the region
that can effectively counterbalance China's
overbearing presence.
Last week, the
Economic Coordination Committee of the Pakistan
Cabinet (ECC), chaired by Prime Minister Shaukat
Aziz, approved the construction of the IPI project
on a "segmented basis".
According to
Petroleum Secretary Ahmed Waqar, under this
approach Pakistan and Iran will construct their
portions of the project and Pakistan will award
contracts worth up to $3 billion.
The ECC
also approved in principle the gas sharing (with
India) of the IPI project, which is scheduled to
start delivering gas to Pakistan from Iran by
2012.
Emphasizing Islamabad's seriousness,
Aziz this week welcomed participation of Russian
companies in the construction of the pipeline. He
said that Russian companies could even lay claim
to some of the share capital in the pipeline. Aziz
made these announcements during a meeting with
Russian Prime Minister Mikhail Fradkov and
executives of Russian energy giant Gazprom.
India not sure where to look There
has been no clear position taken by India on the
IPI issue in the recent past. This week, India's
junior External Affairs Minister, Anand Sharma,
said: "The government is studying all the options
and [will] take a final decision taking into all
factors, including the geopolitics of the
situation."
He said India had three
options before it: import gas from Iran through a
pipeline via Pakistan, ship liquefied natural gas
(LNG) through tankers or buy gas on Pakistan's
border.
In contrast, last month, Indian
Foreign Minister Pranab Mukherjee, following a
two-day visit to Tehran, said that New Delhi
intends to go ahead with the IPI pipeline despite
objections from the United States. "Talks on this
pipeline are going on. When I was in Iran, I had
categorically mentioned that we are interested in
having this pipeline," Mukherjee said.
However, again last month, New Delhi
allayed US fears, saying that the pipeline was at
a nascent stage due to several teething problems
and will take some time before implementation.
The Indian view was conveyed to US Energy
Secretary Samuel W Bodman during a meeting with
Petroleum Minister Murli Deora. India said the
project is weighed down by differences over the
price charged by Iran, transportation costs and
the transit fee that India may have to pay
Pakistan.
Yet, India wants to keep its
options open and not be seen as delaying the IPI
project, even if the underlying strategy is to
keep things on hold.
Politically, it is
not wise for New Delhi to acquiesce to US wishes
while Pakistan takes the bolder decision to go
ahead with what is likely going to be good for the
economy. There is a direct relationship between
international crude oil prices and inflation in
this country, given the dependence on imports.
New Delhi is already anxious about a
possible shut-out of Indian interests in Myanmar
oil and gas by Russian and Chinese oil firms due
to past difficulties with Bangladesh.
The
decision by slick operators Russia and China to
veto a US-led move in the UN to intervene in the
Myanmar junta's alleged human-rights violations
has been a key factor in the burgeoning
relationship.
To sugarcoat any adverse
fallout, the Indian Petroleum Ministry has been
regularly putting out press bulletins to emphasize
that the domestic availability of natural gas in
the country will rise to levels high enough that
dependence on outside sources will not be
necessary.
"The gas supply position [will]
steadily improve from the current level of 70.54
million metric standard cubic meters per day to
192.30 mmscmd in 2011-12," said a recent statement
from the Petroleum Ministry. This projection
reverses earlier ministry estimates that the gas
supply will dwindle in 2011-12.
The
increased supply of gas will be possible because
Reliance Industries Ltd (RIL) and Gujarat State
Petroleum Corp plan to extract gas from 2009-10
from their blocks in Krishna-Godavari (K-G)basin,
the statement says. Curiously, the government has
not officially recognized the find by RIL in the
K-G basin.
Deora is scheduled to visit
Pakistan next month to sort out differences over
transit fees. Deora discussed the matter in detail
during a meeting with Aziz in New Delhi recently,
when he reportedly expressed India's reservations
over "high charges" being quoted by Islamabad.
Aziz also met Indian Prime Minister
Manmohan Singh, but no agreement could be reached
about the transit fees. Aziz reportedly offered to
buy 60 million standard cubic meters of gas per
day from Iran, use half of it in Pakistan and sell
the rest to India at the India-Pakistan border.
According to reports quoting Pakistani
officials, this formula could circumvent India's
need to deal with Iran, be concerned about
security along the 1,035km pipeline in Pakistan
and the transit fees.
But experts say that
it would be better for India to pursue a pipeline
as the other option could make the country more
vulnerable to Islamabad exercising control over
energy supplies. Flows through pipelines can be
brought under international laws.
As per
the calculations, Iran wants to sell natural gas
to India and Pakistan at $4.93 per million British
thermal unit (at $60 per barrel crude oil price).
Pakistan wants to add a transit fee (10% of the
gas price) and a transportation tariff, making the
delivered price of gas at the India-Pakistan
border $7 per mBtu.
India, on the other
hand, has offered transit fees of 15 cents per
mBtu. India's argument is that, ideally, Pakistan
should not charge any transit fees as the pipeline
is a joint project and about half of it, from
Iran's South Pars fields to the Pakistan border,
will be common to both countries.
Iranian
Oil Minister Kazem Vaziri Hamaneh recently said
that the three countries have agreed on a price
formula and now Pakistan and India should hold
talks on the transit issue.
India will
have to make up its mind on the issue.
Siddharth Srivastava is a New
Delhi-based journalist.
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