Pakistan seals pipeline deal with Iran
By Syed Fazl-e-Haider
KARACHI - Iran has finalized a US$7 billion gas pipeline deal to export natural
gas to Pakistan. The two countries on Sunday formally signed an export contract
that commits the Islamic republic to supplying its eastern neighbor with
natural gas from 2014.
The Iran-Pakistan (IP) pipeline, which has been talked about for 17 years, will
connect Iran's South Pars gas field with Pakistan's southern Balochistan and
Sindh provinces and will be crucial in Pakistan's attempts to ease countrywide
electricity shortages.
The deal was signed days after a UN Security Council voted to tighten sanctions
against Iran, but Islamabad believes that these
will not affect the pipeline project.
"As far as our ... project is concerned, it is a commercial agreement to meet
our energy deficit and beyond the purview of this resolution,'' Dawn newspaper
reported Abdul Basit, Foreign Office spokesman as saying.
The United States has sought to dissuade Pakistan and India, which has also
considered joining the project, because of Tehran's nuclear ambitions.
"We have advised Pakistan to seek other alternatives,” Dawn quoted Robert
Blake, the US Assistant Secretary of State for South and Central Asian affairs
as saying in April. "We do not think it is the right time for doing this kind
of transaction (building the pipeline) with Iran."
Iran, which has the world's second-largest gas reserves after Russia, needs
around $25 billion a year in oil and gas industry investment, according to
Reuters. Its gas production capacity of 600 million cubic meters per day is
expected to rise to 1.1 billion cubic meters by 2015, but sanctions by the
West, political turmoil and construction delays have slowed its development as
an exporter.
US Defense Secretary Robert Gates reportedly said before the UN sanctions vote
last week that the UN resolution could clear a way for individual states and
the European Union to block foreign firms expanding Tehran's oil and gas
exports and impose other curbs on business activity.
The pipeline will provide gas to the power sector to generate about 5,000
megawatts of electricity, Some analysts say it will not be possible for the
government to provide the fuel to domestic consumers due to its high price,
which was one reason behind India's withdrawal from the project.
Pakistan's Deputy Energy Minister Kamran Lashari, who was present at the
signing ceremony, said Islamabad will conduct a one-year feasibility study for
building its section of the pipeline, local media reported. Iran has built 907
kilometers of the pipeline between Asalooyeh, in southern Iran, and Iranshahr.
Iran's Deputy Oil Minister Javad Ouji reportedly said that Iran this week will
start building the next 300km stretch to the Pakistani border, through the
Iranian port of Chabahar. Pakistan will take three years to build the 700km
link from the Iranian border to Nawabshah, in Sindh province.
"This is a happy day," Ouji said at the contract signing ceremony in Tehran,
Agence France-Press reported. "After decades of negotiations, we are witnessing
today the execution of the agreement ... to export more than 21 million cubic
meters of natural gas daily from 2014 to Pakistan."
On May 28, the two countries signed the sovereign guarantee agreement, which
makes effective made Gas Sales Purchase Agreement (GSPA) signed by the
countries last year in Istanbul. Under the GSPA, Iran agreed to export 750
million cubic feet per day (mmcfd) with a provision to increase it to one
billion cubic feet a day (bcfd) at the rate equal to 78% of crude oil for the
next 25 years.
The pipeline was originally planned to extend from Pakistan to India in 1993.
India walked away from the project last year, but has kept its options open to
join at a later stage. After India's withdrawal, Beijing has shown interest in
building a pipeline through Pakistan carrying Iranian gas to China. China's
National Petroleum Corporation is already involved in developing the South Pars
field.
Pakistan's demand for gas, which is the primary fuel helping run the economy,
has surged to 4.7 billion cubic feet a day (bcfd) against actual supply of 3.6
bcfd. The country's natural gas reserves, which meet over 50% of its
requirement for energy, have depleted rapidly in recent years with few
hydrocarbon discoveries and decline in production from its largest Sui gas
field in Balochistan.
Syed Fazl-e-Haider (http://www.syedfazlehaider.com) is a
development analyst in Pakistan. He is the author of many books, including
The Economic Development of Balochistan (2004). He can be contacted at sfazlehaider05@yahoo.com.
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