Energy needs: Russia may be awarded IP contract by April

TAPI project faces a setback as Afghanistan pulls out.

ISLAMABAD:

Ignoring mounting pressure from the United States, Pakistan has finally decided to negotiate a $1.5 billion financing and construction contract for Iran-Pakistan gas pipeline with Russia and crucial talks between the two sides are expected to be held early next month.

The government is pressing ahead with the project and has not been deterred by the reluctance of Industrial and Commercial Bank of China (ICBC) to sign a contract for financial advisory services to raise funds for the pipeline apparently due to US pressure.

“Pakistani and Russian officials will hold talks on April 2 in Moscow to discuss the possibility of awarding the gas pipeline contract to Russian energy giant Gazprom,” Petroleum Secretary Ijaz Chaudhry said while talking to the media here on Wednesday.

However, on the other side, the US-backed transnational gas pipeline project – popularly known as Turkmenistan-Afghanistan-Pakistan-India (TAPI) – faced a setback as Afghanistan pulled out of the venture, saying it did not need gas and was only interested in transit fee.

“Afghanistan has refused to purchase gas and wants only transit fee on transmission of gas via its territory,” Chaudhry said, adding final round of talks on the transit fee would be held on April 19 in Kabul.

Under the TAPI project, Pakistan was to receive 1.365 billion cubic feet of gas per day (bcfd), India 1.365 bcfd and Afghanistan 0.5 bcfd. “Now after Afghanistan’s withdrawal, Pakistan and India will share the gas allocated to Kabul,” the petroleum secretary said.

Transit fee is expected to be around 50 cents per million British thermal units (mmbtu), he disclosed.

Replying to a question about the Iran-Pakistan pipeline, Chaudhry said Gazprom had expressed interest in the project. “Gazprom will make all arrangements including fund raising and construction,” however, Pakistan would need to relax rules of procurement.

During a visit of Foreign Minister Hina Rabbani Khar to Russia in February, Moscow had offered to fully finance the $1.5 billion project if Gazprom was awarded the contract without invitation of bids.

Under the project, an 800-km-long pipeline will be constructed from the Iranian border to Nawabshah. The project has entered implementation phase and work on front-end engineering and design, feasibility and detailed route survey has started, which will be completed by June.

Indian crude cheaper
than Iranian oil

The petroleum secretary rejected the talk of Iranian oil imports, saying the proposal was not on paper. “Specifications of Iranian crude oil also do not match with refineries working in the country,” he said.

However, Pakistan will get 35% cheaper oil from India because of low transportation charges.

“Pakistani and Indian officials will meet in the third week of April to discuss the quality, quantity, prices and timeframe for oil imports,” he said, adding the Federal Board of Revenue would have to issue an SRO, allowing the government to import oil from India.

Following the notification, Indian oil companies will also be able to work in the upstream sector in Pakistan.

LNG import tenders on
the cards

Discussing the rules governing import of liquefied natural gas (LNG), Chaudhry said rules would be announced within a few days. “The government will soon issue two tenders for import of 400 million cubic feet per day (mmcfd) of LNG each.”

The ongoing LNG import project had become unviable as the three private sector parties, which had been allowed to make imports, wanted sovereign guarantees, he said.

Energy conference

Chaudhry pointed out that a proposal, tabled in the recent energy conference in New Delhi, encouraged Asian nations to meet energy needs of fellow countries rather than depending on imports from other sources.

“A proposal has also been floated for laying a gas pipeline from the Central Asian states to China and then to India,” he said, adding the conference participants developed consensus that Asian countries should have their own energy pricing mechanism rather than depending on markets of Middle East, London and Japan.

Published in The Express Tribune, March 29^th, 2012.