The fate of Iran-Pakistan gas pipeline project hangs in the balance as Pakistan has asked Iran to get South Pars gas field’s reserves ratified from a third party and revise the price downwards by linking it with the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline project.
The project is already in the doldrums because of fierce opposition from the United States, which is offering cheaper gas if Pakistan abandoned the project.
Sources told The Express Tribune that on the other hand Iran had offered Pakistan that it could provide the entire cost of $1.2 billion required to finance the construction of the pipeline.
Sources said Pakistan and Iran discussed these three issues in a meeting between the visiting Iranian International Affairs Vice President Ali Saeedlou and Pakistani officials on Monday.
South Pars, the world’s largest gas field, is located along the Iranian border with Qatar in Persian Gulf. The Qatari side of the field is called the North Field. Recoverable reserves are estimated at 14 trillion cubic metres of natural gas and 18 billion barrels of condensate.
Qatar started gas production from the field in 1989 and surpassed Indonesia, a major producer, in liquefied natural gas (LNG) exports in 2006. However, Iran has delayed development of the field that is why Qatar’s annual production is almost twice that of Iran’s level.
According to reports, delays and lower production by Iran will shift some gas reserves to the Qatari side and lead to a loss of condensate yield due to low field pressure.
“This has prompted Pakistan to ask Iran to get the gas reserves certified from a third party,” an official said, adding Iran feared that the certification of reserves and lowering of price would further delay the project.
Under the TAPI project, Pakistan has finalised gas price at 70 per cent of Brent crude price while for Iran-Pakistan pipeline the price has been set at 78 per cent of oil price.
“There is a clause in the agreement according to which gas price can be revised if Pakistan succeeds in bringing cheaper gas from other sources,” an official of the petroleum ministry said.
In the meeting, Pakistan also told the Iranian side that it was facing problems in arranging funds for the project due to the restrictions imposed by the US on countries dealing with Iran.
Pakistan’s largest explorer Oil and Gas Development Company (OGDC) and National Bank of Pakistan (NBP) have already refused to provide financing for the pipeline.
OGDC management voices fear that its foreign shareholders will withdraw their investments if it financed the project while NBP is worried that its foreign branches will be closed. “We are ready to bear the full cost if Pakistan presses ahead with the project,” an official quoted Iranian authorities as saying during the meeting.
However, talking to The Express Tribune, Petroleum Secretary Ijaz Chaudhry denied that the government had sought a revision of the Gas Sales Purchase Agreement in order to link the price with the TAPI project.
He also dispelled the talk that Iran had offered to finance the whole project. “We have only discussed with the Iranian delegation the ways to accelerate work on the project,” he added.
Published in The Express Tribune, February 8th, 2012.