Energy solutions: Pakistan and Iran put oil project in the pipeline
Iran and Pakistan have drawn up plans for an oil pipeline. The move will not be welcomed by the US, given that it recently expressed strong opposition to a gas pipeline project between Iran and Pakistan, going so far as to threaten Islamabad with sanctions.
The oil pipeline plan emerged after Iran offered Pakistan oil supplies on a long-term deferred payment scheme. The pipeline would be laid from Iran to Gwadar port, where Iran will also set up a refinery to process crude oil.
Petroleum Minister Dr Asim Hussain said that the two sides had been discussing the proposal of an oil pipeline in different meetings. “But I am not aware about finalisation of the proposal,” Hussain said. “I am also not aware of any discussion taken place about the oil pipeline in a recent meeting of Pak-Iran JEC meeting,” he added. However, documents seen by The Express Tribune suggest otherwise.
Officials said that the two countries have signed a memorandum of understanding, adding that ratification of the memorandum will be sought from the federal cabinet. Joint working groups have been formed to take the proposal from plan to reality.
The oil pipeline was first touted when President Asif Ali Zardari visited Tehran on July 15, accompanied by Interior Minister Rehman Malik and Petroleum Minister Dr Asim Hussain. During the trip Iranian authorities reportedly extended support to Pakistan’s energy sector. Sources revealed that Iran also offered to provide oil on six-month deferred payments to meet Pakistan’s domestic needs.
Proposals for the pipeline and the oil refinery were also discussed during the recent 18th session of the Pakistan-Iran Joint Economic Commission meeting held in Islamabad.
Deputy Managing Director Aftab Ahmad told The Express Tribune that Pakistan Refinery Limited was designed in 1962 to process Iranian oil, though consumption of Iranian oil in Pakistan is very low. “No refinery in Pakistan can process 100% Iranian crude oil,” he said. Therefore the pipeline between Iran and Pakistan would only be feasible if Iran also sets up a refinery.
Pakistan has lost 45,000 barrels of crude oil per day since international export sanctions were imposed on Iran, and solutions are required to fill the gap. Another industry source said that Iranian oil had more components of furnace oil. Pakistan’s furnace oil requirements have increased from three to four million tons in 2004-2005 to nine million tons in the current financial year. Refineries in Pakistan currently have a furnace oil production capacity of just three to 3.5 million tons per year.
At present, Pakistan State Oil imports furnace oil to meet the power sector’s requirements. “If India is importing Iranian oil, why should Pakistan not import it to meet furnace oil and other petroleum product requirements of the country?” asked the industry source rhetorically, adding that Pakistan will save 20 cents per barrel as it will no longer have to bear the costs of transporting Iranian oil.
Published in The Express Tribune, September 26th, 2011.
COMMENTS (33)
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@Pragmatist: Warm water port. Energy corridor aka Pipelinistan. Raw materials.
We need trade, not aide.............we are not beggers, we are donors..........
@Pundit:
still what could US do to iran till now?
Santosh has a point.. beyond 2020, there will be only 12 countries in the world producing oil. And all oil will be gone by around 2040 according to global estimates available online. even if we complete this pipeline by 2020 ( after costs multiplying several times) , we will practically use it for 20 - 25 yrs. It will be a economic disaster, if we are unable to recover such huge cost. Not to forget, oil prices itself will probably double by 2020...
Beginning of September, Iran and Pakistan announced the gas pipeline will go ahead. About a week later, Pak Govt . said the deal was a ‘tool’ to use the Iran against USA and now the oil pipeline. Is the GOP working to play games USA or for the benefit of its citizens?
What are we waiting for !? Lets get this oil project on road !
Good way to teach US a lesson. Pakistan needs energy and US has done nothing about it. So Iran is the only option. Let US be angry.
its aid vs trade i chose trade
The pipeline would be laid from Iran to Gwadar port, where Iran will also set up a refinery to process crude oil.
That's funny. Iran is a big oil producer, but it exports crude and imports refined petroleum products for its own domestic use because due to sanctions it is unable to setup its own refining capacity. But amazing how Iran has the capacity to setup a refinery in Pak.
Pakistan will save 20 cents per barrel as it will no longer have to bear the costs of transporting Iranian oil Amazing - a multi-billion dollar pipeline, paid for by savings of 20 cents a barrel! So, the pipeline will have paid for itself once Pak has imported about 5 billion barrels of oil from Iran. With Pak importing about 100 million barrels a year total, the pipeline will be paid for in 50 years if Pak stops importing oil from Saudi and other Arab states (who provide deferred payments that amount to an effective 7-8% savings on a $100 barrel of oil due to capital costs deferment). Shows how well-thought out this plan is - and Pakis still think the rest of the world is to blame for their economic and other woes.
A straight blunt NO to US is the solution. ask them to get the hell out of region or stay quiet. Accept what ever sanctions, it has made no difference to Iran / North Korea and it wil not make any difference to us. we can produce and eat ourselves. we do not need to import food and thts good enough for our survival. Rest Iran / China / Turkey and few others are good enough for trade and other matters.
Plz Plz go ahead with this project. its absolutely essential for Pak. US just wants to starve us anyways.
This is all too far fetched and probably the announcement is political. We are already into the crisis. Any pipeline deal will take time to materialize. Pakistan seem to be running behind time. Nobody invests in a war ravaged country. See what the Chinese did with Pakistani coal fields and the proposed thermal power plants there recently. What if the US starts funding, training and arming the Baloch to disrupt the project. Pakistan first need to attain peace and enforce law and order before business can start. This however has a lot of provocative value to the US and a PR value to the domestic population.
Pray tell but who plans to protect this oil pipeline (dream)?
@Moise: Why should Russia and China care? What do they get in return?
Pakistan have to understand Era of America is on end, have to make own value and interest in the region, have to tight up friendship with IRAN more stronger.
Pakistan joins Iran in being an international Pariah!
Wise move. Look after ur own interests first without hurting others
Wise move. Look after ur interests without hurting others first.
Great move indeed! I hope this project gets going, which, I hope, will come as a slap on USA's face! We don't have to suffer because of their own problems with Iran! That bully should NOT be tolerated creating hurdles for our economic development!
At present, Pakistan *Sate Oil imports furnace oil to meet the power sector’s requirement.
*Please correct sprelling of State.
These discussions have been going on for decades and will amount to nothing.
O man... first able to pump the gas from Iran then think about oil...
Pakistan should have taken this decision long before but US opposition did not let our govt to take such decisions that would have eased life of a common pakistani.now time has come for Pakistani govt to take decisions in favor of pakistanis rather than to serving US interests
Sanction for what? Let China Russia veto it.
We have selected allies it means!