India has offered to build a pipeline from its territory to the Wagah border for export of oil to meet all needs of Pakistan if Delhi is assured purchases in large quantities over the long run, a move that will deprive energy-rich Gulf countries of a lucrative market.
Pakistan believes that it can get oil supplies from neighbouring India at 30% cheaper prices because of low transportation cost, say officials.
A government official told The Express Tribune that Pakistan and India were likely to strike a deal with the signing of a memorandum of understanding on the concluding day of two-day talks on Tuesday relating to import of oil and liquefied natural gas (LNG) from Delhi. “India has told us that it has a surplus capacity of 50 million tons of oil,” he said.
During the first day of technical-level talks between the two countries in Islamabad, the Pakistani team expressed the desire that it could import all petroleum products including high-speed diesel, furnace oil, petrol and jet fuel from India to meet domestic requirements.
In a unique proposal, Pakistan offered export of naphtha – a surplus product – to India, which Delhi would convert into petrol and then re-export it to Pakistan. “India also needs naphtha for its industries,” the official said.
“The two sides will finalise the prices of petroleum products and transportation charges today (Tuesday),” a participant of the meeting said.
Besides laying an oil pipeline to Wagah, “we can also ship oil through sea route to meet the demand of southern parts while tankers may also be used in this regard,” the official quoted the Indian side as saying.
However, Pakistani officials looked not interested in oil supplies through tankers, believing it would prove expensive. However, import of oil through ships was considered cheaper, but the pipeline was described as the cheapest option.
Pakistan consumes 6.9 million tons of diesel per year, of which domestic oil refineries produce 3.2 to 3.4 million tons and the rest is imported.
Furnace oil demand stands at about nine million tons, of which domestic refineries produce about 2.5 million tons and the remaining is imported. The country is working on some new power plants, which will increase demand of furnace oil in coming years.
Pakistani and Indian officials would also discuss import of 200 million cubic feet of liquefied natural gas (LNG) per day from Delhi, which would be able to swiftly start deliveries.
Pakistani authorities believe that import of LNG from Qatar and other countries like Malaysia would take three years, while India may start supply in six to eight months, the official said, adding the import plan would be finalised during the two-day talks.
The Indian delegation was headed by P Kalyanasundaram, Director (International Cooperation and Corporate Affairs), Ministry of Petroleum and Natural Gas and comprised representatives of leading Indian companies.
The Pakistani team was headed by Shabbir Ahmed, Joint Secretary (International and Joint Ventures), Ministry of Petroleum and Natural Resources, representatives of ministries of commerce, foreign affairs, finance and others.
Earlier Petroleum Secretary Muhammad Ejaz Chaudhry said this dialogue would provide an opportunity for Indian businessmen to explore potential areas of trade with Pakistan.
In a statement issued by the Ministry of Petroleum and Natural Resources, Petroleum Minister Dr Asim Hussain said there was potential for trade in petroleum products between India and Pakistan. “Pakistan is interested in importing furnace oil and diesel,” he said while talking to the visiting Indian delegation.
Published in The Express Tribune, May 29th, 2012.
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ
@Imran: You have a atomic "bum" but not atomic power. They are two very different capabilities. You cant be Iran, because you have no oil. you cant be india because it is 10 times the size of Pak. So what can you be? something akin to afganistan, if you continue openly and arrogantly using non state actors and terrorists as official strategic assets against the rest of the world. That is like using criminals and mafia for control( as it is happening in Karachi). Till Pakistan does not change its attitudes, it will have to suffer electricity and other fuel shortages. Unfortunately, attitudes do not change overnight. they take decades and generations. So there is little hope for positive change in next 20 years.
First pakistan promised to eat grass. Now it will swallow Indian oil. Nothing wrong in that. fact is that indian economy is 10 times larger than pakistans. So it can benefit both countries. Pakistan unfortunately has a terrible ge0-strategic location. Mountains to north, deserst to west, Afganistan to north east. It has no trade routes to rest of world except sea. that makes transportation inland expensive. Paks best bet for long run is to sincerely make peace with big brother India. No point fighting a losing economic and military battle. Pak must do what is good for its 190 million poor, and not the ultra rich rulers(and bloggers!)
Both of these countries will earn good benefit from this deal and will make more nuclear weapons in future to show military dominance. No benefit for public.
@IsmatUllah: That is certainly desirable but it would only happen in the long run. Even then both Pakistan and India would need every bit of energy from any source possible. Just that the right balance would have to be struck in the mix to make sure it's affordable.
Funny!!!!!! Only 2-3 days back the Congress govt increased the petrol prices by a whopping 12-13% in one day!!
India and Pakistan are neighbours......mutual co-operation in any field would be beneficial to both. It does not require sense to understand this, it requires courage.
@Freedom Seeker: - india will convert pakistans NAPTHA into petroleum .. it is snot about importing oil , it is a conversion technology which india has.
@Ayesha: That refinery was planned in 2006, when the financial crises had not hit the middle east and Pakistan had a better financial standing. Since then, after the financial crises and the new government in Pakistan, the refinery has been shelved after 2008. The cost has also increased to US$ 7 billion, and it is unlikely to be constructed anytime soon. So import of finished products from India is a very good idea.
Pakistan would have realised by now that how much their economy and people suffered due to its anti-India policy for the past six decades for which two M's were largely resposible.
@xyz: "Why should Pakistan not import direct from Iran via pipelines and refine it for domestic consumption?"
BEcause Iran does not have any refining capacity.
India is desperate to export oil products (whether surplus or not) to Pakistan due to loss of revenues on other fronts such as exports to EU and US. From Pakistan's perspective, importing from India is probably no issue but we should make sure that we maintain trade balance. @Its (still) Econonmy Stupid: India should not sign the deal if it thinks Pakistan can't clear bills @realist: Somebody is definitely desperate as I mentioned above. And nobody is talking friendship here, it's just trade and no one is enforcing it on India
The under construction refinery at Khalifa point near Karachi can meet all of our domestic needs. see: http://www.parco.com.pk/index.php?option=com_content&view=article&id=177&Itemid=185
but i dont think pakistan will need refined petroleum products for long, as in near future couple of refineries will be starting their production, if i am not wrong.
India itself import most of its oil and a major supplier is Iran. So why not buy oil from Iran and pay them in Pk. Rupees just like India do. Then Iranian have to buy Pakistani goods. This will be an excellent deal rather then buying oil from India and pay third party commission and our neck. They raise thousands of concern in IPI pipeline regarding Pakistani intentions and security. I think better for Pakistan to consider other options rather then relying on India for such vital commodity.
@Sid...They are talking about refined oil from oil refineries and not about imported crude oil. India has got surplus refinery capacity with one most recent refinery being opened near the Indo-Pak Punjab border at Bathinda.
This is a very stupid Business transaction for Pakistan. Instead of Depending on Energy Hungry India who itself Imports Energy from Gulf Countries, Pakistan should shift the Energy mix to Hydropower, Renewable energy and Coal which is abundant in Pakistan. Energy mix should Guarantee a price that is Competitive and cheap to the Industry so that Energy Input can be such which keep the cost low and competitive. Energy from India will still be expensive as compare to the Hydro and Coal Power within pakistan. I very much doubt that Corrupt Commerce Minister Amin fahim, Convicted Criminal Yusuf Raza , and Mr. ten percent along with their 40 Thieves wants to make Money in this deal. This Must be rejected . It's not beneficial for Pakistan in any way,. Keep an eye On criminals who are eager to make this deal and deal with them In the court.
@Sid: You are missing a greater part of oil supply chain..what India importing is crude but has over capacity in its refineries (Reliance has world's largest refinery location in Gujarat)..so its offering finished petroleum products which Pakistan is importing from elsewhere..now get it?
@Sid: Pakistan doesn't have the capacity to process crude oil to finished products up to his required quantities, so it has to import the finished goods like furnace oil, diesel etc. On the other hand, India has the capacity to produce finished products more than the domestic demand and can sell those to Pakistan.
@Sid: That's what I thought too until I read the article again. Apparently the imports will be of refined petroleum products (and not crude) of which India has excess domestic capacity and is currently imported by Pakistan. Iran itself has no refining capacity and imports its own diesel/ petrol.
Wait a minute. Is India not itself an oil importing country that depends largely on imported oil and that too mostly from Iran on other side of our border, despite to the disliking of the USA.So how can the oil be less expensive importing it from India. What am I missing here ?
Darn good idea, should integrate the economies to the benefit of each of them. Maybe the Dubai crooks will be done with
I dont see this news anywhere in the Indian media. No one is desperate for failed state's friendship.
''Pakistan believes that it can get oil supplies from neighbouring India at 30% cheaper prices because of low transportation cost, say officials.''
Pakistan also believes in tooth fairies and santa claus.
The million dollar question is Can pakistan clear it bills in time in hard currency?