ISLAMABAD: A top official from the petroleum ministry has said Pakistan is lagging 45 days behind scheduled completion of the Iran-Pakistan (IP) gas pipeline because Islamabad is facing difficulty arranging finances for the project.
This is the first time that the government has conceded that the project’s completion faces a delay. The pipeline was originally supposed to commence supply from Iran’s South Pars gas field by the end of December 2014. It now appears that operations may not start till 2015.
Pakistan and Iran have already signed a sovereign guarantee agreement: if the project is delayed beyond agreed dates, Pakistan will have to pay a penalty to Iran.
Reiterating the government’s stance that it will not abandon the multi-billion dollar project, Secretary Petroleum Ijaz Chaudhry on Thursday claimed that despite delays, the project will be completed on time. He was speaking at a Public Accounts Committee meeting.
Chaudhry’s comments came within 48 hours of a Pak-China Joint Energy Working Group meeting; wherein Islamabad was unable to secure Chinese financial assistance for the project. Earlier, a consortium led by a Chinese firm backtracked from its commitment as lead financial advisor for the project. It is believed that mounting pressure from the US to shelve the Iran pipeline project led to its withdrawal.
Ijaz Chaudhry said that a steering committee – comprising ministers for Finance, Foreign Affairs, Privatization, Petroleum and other key officials – last week reviewed progress on the IP project. The committee vowed to push ahead with the project despite financial and other constraints, he added.
He said that in the absence of foreign assistance, the government will meet financing requirements through a Gas Development Surcharge (GDS). Chaudhry said that for the current fiscal year, the GDS collection target is Rs34 billion; and so far 80% of the target (Rs27 billion) has been secured. According to media reports, the government is also considering increasing the GDS rate from the coming financial year to raise additional funds.
Gas shortages in the country are getting severe with time. At present, supply lags behind demand by a colossal 25%, necessitating partial closure of industries and CNG stations.
Chaudhry said that mushrooming numbers of new CNG stations and parliamentarians’ gas schemes are the two biggest drains on the country’s gas resources. He said that against an allocation of 9%, CNG stations are already consuming 15% of total production. Despite a ban on the setting up of new CNG stations, the Oil and Gas Regulatory Authority issued 500 licences during the prohibition, Chaudhry complained. He said that 400 additional CNG stations have been built, and are now requesting gas connections.
Sui Northern Gas Pipeline Limited (SNGPL) Managing Director Arif Hameed said that this year, the authority laid down a 5,500 kilometre pipeline for new gas connections under the parliamentarians’ schemes on the Prime Minister’s directives. But the company does not have sufficient gas to supply to the 600,000 new consumers on this pipeline, he said. He informed that for 600,000 consumers, at least 225 million cubic feet gas is required per day – while the company can provide only 80 million cubic feet to 225,000 connections.
Hameed said that gas required under the parliamentarians’ directives is three times more than SNGPL’s capacity, bringing the system under extreme pressure.
Chaudhry said that Pakistan has globally the highest conversion rate to CNG from fossil fuels: which stands at 267%; followed by Argentina where the conversion rate is below 100%.
“The grave situation has exposed officials to extreme political pressure, while new connections have affected supply to existing consumers,” said Chaudhry.
Published in The Express Tribune, May 11th, 2012.
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