Energy cooperation: Iran willing to build Pakistan section of gas pipeline

Published: September 6, 2011

Industrialists pin hopes on gas imports from Iran to shore up loadshedding.

ISLAMABAD: Energy cooperation between Pakistan and Iran is expected to receive a boost this week, as Iranian Foreign Minister Ali Akbar Salehi will offer Tehran’s help to build Pakistan’s portion of the multi-billion-dollar gas pipeline, an Iranian diplomat said on Monday.

The offer is likely to come as part of a wider dialogue between the two neighbours on a range of economic issues. Sources said on Monday that Pakistan and Iran are expected to sign four agreements, covering energy, financial services, media and technical cooperation.

Salehi is scheduled to arrive on Tuesday (today), leading a 40-member delegation for the Pakistan-Iran Joint Economic Commission’s meeting, which will be held in Islamabad on September 7. The Pakistani side of the talks is expected to be led by Finance Minister Abdul Hafeez Shaikh.

The Iran-Pakistan pipeline is expected to be a key part of the agenda of the JEC talks. The pipeline was originally meant to have India as its terminal location but New Delhi has not been able to make a firm commitment on the project to date.

Iran has already built its portion of the gas pipeline up to the Pakistani border. The Pakistani portion of the pipeline is expected to cost $1.65 billion, little more than a fifth of the total $7.5 billion price tag of the whole project. The total cost may rise after the completion of a feasibility study. It is expected to begin supplying gas to Pakistan by the middle of 2014.

(Read: Iranian gas pipeline – Pakistan seeks financial adviser for project)

At its peak, the pipeline is slated to supply up to 55 billion cubic feet of gas from Iran’s South Pars field to Pakistan. That amount is expected to cover about 20% of Pakistan’s current demand, and would not be enough for the rising need for gas in the Pakistani economy.

Government officials say all of the supply from the Iranian pipeline will be dedicated for power production and would be expected to generate up to 5,000 megawatts.

Production costs for gas-fired power plants are about 35% less than those for oil-fired power plants.

Tehran is also expected to offer assistance in building three power plants in Pakistan, with a total capacity of 250 megawatts, including a 150-megawatt coal-fired power plant and about 100 megawatts of wind power generation capacity.

Among the more controversial aspects of the visit will be Iran’s request to set up branches of the state-owned Bank Melli in Pakistan. The bank has been placed on several international sanctions lists, including those of the United States. Islamabad is expected to reverse its earlier stance on the request and move forward with Iran’s proposal.

Not having banking operations in other countries has made it difficult for Iranian businesses to conduct trade. The State Bank of Pakistan is expected to begin guaranteeing letters of credit – a necessary tool for global traders to exchange payments – for trade with Iran, which is expected to help increase the volume of commerce between the two nations. An Iranian diplomat said that Tehran is targeting increasing bilateral trade from the current $1.2 billion to $4 billion by 2014.

The two nations are also expected to discuss expanding air travel, including commencing direct flights between Islamabad and Tehran. Currently, there are direct flights from Karachi and Lahore to Tehran and Mashhad.

Iran is also expected to request meat and livestock exports from Pakistan as it tries to switch over from more expensive supplies from Europe. Tehran has already invested in a meat processing plant in Lahore geared to exporting beef and mutton to Iran.

(Read: The rise of Pakistan in the global meat trade)

As a direct corollary of the meat and livestock trade, Pakistan and Iran are also expected to agree to closer collaboration on quality control. A cooperation agreement is expected to be signed between the Pakistan Standard Quality Control Authority and Iranian Research and Industrial Institute.

A separate agreement is also expected to cover media cooperation between the two countries.

Published in The Express Tribune, September 6th,  2011.

on Twitter, become a fan on Facebook

Reader Comments (25)

  • sam
    Sep 6, 2011 - 6:24AM

    Cooperation with Russia, China , Iran and India can help us build back our economy if not in Aid form … Good to see that GOP is taking initiatives.

    Recommend

  • Mohan Ram
    Sep 6, 2011 - 7:02AM

    How is Pakistan going to pay for the gas? as Iran needs Euro and $USD foreign currency to trade with outside world. They don’t require the banana notes from Pakistan. Do barter trade with goats and cows. A few das gas supply will wipe out Pakistans livestock. Then what.? use up your dollar and euro reserve? Then the world banks will put Pakistani banks on notice and slowly black list them.

    India found this out and they had to resort to banks in Turky.. But this is not going to last as the Europeans and americans will start squeezing the Turkish banks. pakistan could be opening a pendoricas box.

    Recommend

  • Mirza
    Sep 6, 2011 - 8:28AM

    Some biased people call me pro USA due to my support for democracy and freedom. However, when it comes to foreign policy and economic progress, Pakistan must cooperate with its neighbors irrespective of what the US wants. Pakistan should not take dictation from any other country when it comes to its economic and civic progress. If Iran is offering us a good deal we should run and grab it. It is a matter of common sense to have trade and cultural relationships with the neighbors no matter who they are, without compromising our economic interests.

    Recommend

  • khan of quetta
    Sep 6, 2011 - 9:02AM

    we will send the money through our LAND border ever herd of ECO

    Recommend

  • sanjithmenon
    Sep 6, 2011 - 9:20AM

    Ha Ha … Iran will build it? Does Pakistanis know what expertise Iran has till date to build a gas pipeline!

    Recommend

  • Anoush
    Sep 6, 2011 - 9:36AM

    @mohan…well i think the revenue earned by power generation from the gas will be sufficient to pay for iranian gas and further additional export proceeds from such power generation and reduction in oil import bill will surely have a positive impact on both foreign exchange reserves position and Pak Rupee strength

    Recommend

  • Anoush
    Sep 6, 2011 - 9:42AM

    @mohan….the gas is to be used for power generation and power is to be sold to customers who will pay for the cost of gas they use..further,gas will be used since demand already exists so the question of not being able to pay for the gas is simply irrelevant….Moreover, it will serve to save us oil import bill and will have a positive impact on our foreign exchange reserves position

    Recommend

  • vasan
    Sep 6, 2011 - 10:43AM

    Good idea. Once this is completed, then the extension to India can be worked out at some point in time when the dangers from the Terrorism in Pakistan ceases .

    Recommend

  • Muhammad Abbas
    Sep 6, 2011 - 10:54AM

    Yes , Iran can build it. As the pipeline which Iran had to build was far earlier then expected. Secondly the cost which Pakistan is currently given to Rental Plan can be accomodate there. Thanks to GOP for atleast taking this step.

    Recommend

  • Sep 6, 2011 - 11:13AM

    So when Hillary is coming to stop this?

    Recommend

  • Ali. Mir
    Sep 6, 2011 - 11:18AM

    Greater economic ties with China,Iran and India are the way forward.

    Friends of democratic Pakistan and the promised aidf just was a myth

    Recommend

  • S Khan
    Sep 6, 2011 - 11:56AM

    My view is IRAN is our neighbor a good one, we have to live with them let us co operate on different developmental projects to make our relationship stronger, forget about outside interference and intrests we must not be dedicated by aelien intrests which has cost PAKISTAN heavily till now.

    Recommend

  • malik
    Sep 6, 2011 - 12:07PM

    Iran…. Welcome to Pakistan’s Donor Club !!

    though we would have preferred to receive your aid in cash….:)

    Recommend

  • SK
    Sep 6, 2011 - 12:23PM

    We open up relations with Russia, people have problems here. We talk to Tajikistan and China, people have problems here. We open up relations with the Iranians, people have problems here.

    Lets just forget these ‘people’ and continue building on relations with countries in the neighborhoods. The people just like to sit in their drawing rooms and have nothing constructive to say.

    Recommend

  • Pundit
    Sep 6, 2011 - 12:28PM

    Pipe Dreams

    Recommend

  • Incredible
    Sep 6, 2011 - 12:53PM

    No one gives anyone something for nothing.

    “Iran’s request to set up branches of the state-owned Bank Melli in Pakistan”. This is the same as Saudi’s did by pumping money in Pakistan and then create havoc.

    Take the deal BUT only with Pak and Paki interst first.

    Recommend

  • Adil
    Sep 6, 2011 - 2:30PM

    It is interesting to see that only Indians here are unhappy about this. This means this is a good deal for Pakistan. I say, give Iran a go ahead to build the pipeline and power plants.

    @ sanjithmenon,

    Yes, Iran can build the pipeline. They are building pipelines left and right in their country. The same pipeline which they have built upto Pakistani border is actually 1200 Km long inside Iran coming from fields in west of Iran. If they have been able to build that pipeline is less than 3 years so can they build the Pakistani portion which less than half that length. Not only this but Iran is also one of 9 countries which manufactures natural gas combined power plants which produce very cheap electricity to the tune of just a quarter of the cost of an oil fired power plant.

    Recommend

  • Sep 6, 2011 - 2:41PM

    I’m from the US and I don’t view such relations as anything negative. What Iran and Pakistan do as neighbors isn’t too interesting. I only really think of Iran when they fall into their habit of making ridiculous accusations and that’s because I have a low tolerance for idiots somehow managing to gain enough power to decide the fate of anyone, let alone the population of a country. If you can manage to tolerate Iran enough to interact in such ways, more power to you.

    Do what you have to do to. My only real reaction to hearing it was “I hope the workers they’ll use are going to have some form of security.” as, well, lets face it, it’s a pretty good and easy target for people who want to prevent a country’s growth with the distance it stretches, leaving enough openings to not even require a plan.

    Recommend

  • Saddique
    Sep 6, 2011 - 3:31PM

    @Mohan Ram:

    Don’t worry we will be paying in paying in Indian Rs.

    Recommend

  • FARHAN
    Sep 6, 2011 - 3:38PM

    Great news. It would be great economic decision of two countries. Pakistan’s gas shortage is going to further hurt its economy in after 2 years from this point, so Pakistan must get this opportunity at any cost.

    It will also help Iran, as it can sell it abundent gas to India and China. It is expected that China and India both welcome this move but as expected US will try to pressurize Pak on this development.

    Recommend

  • Cautious
    Sep 6, 2011 - 6:03PM

    And is Iran going to defend it? — building a pipeline through Jihad Central is a high risk proposition – the pipeline from Iran to Turkey gets destroyed on a regular basis and that section of the World is considered “safe” compared to Pakistan.

    Recommend

  • Abdul Wahab
    Sep 6, 2011 - 7:01PM

    No one gives a heed to what u Indians think. Pakistan has better relations with Iran than u have. We always supported them, and I guess Iran also likes the fact that they are not friends with a country like India which leaves it when in crisis. Moreover Iran is a Muslim country and r like brothers to us.
    If they wanna build the pipeline y not, ofcourse we are payin them for it.
    @sanjithmenon : Yes they hav experience in it, they built their side of it and there is a line from Iran to Turkey as wel.
    @Mohan Ram : An insensible questioned asked mate, v well answered by Anoush.
    @vasan : Are u kiddin me.
    @Cautious: u worry abt 26 home originated insurgencies in India. I admit 10% of Balouchistan is a no-go area with problem. But rest is in peace. Moreover Balochis are our brothers we will get them back eventually. Recommend

  • Sep 6, 2011 - 8:40PM

    @MarkH:
    Iraq has weapons of mass destruction was uttered by Irani?

    Recommend

  • Mohan Ram
    Sep 6, 2011 - 9:57PM

    @Anoush: Idon’t think that you have understood the implications. Iran want the US dollars and the Euro and not Jinah and Gandhi on the bank notes

    Recommend

  • gggff
    Sep 7, 2011 - 2:55AM

    Main mohan u dont need to worry we will pay with another banana currency . Ie Indian rupee

    Recommend

More in Pakistan