The incremental impact of the price of IP gas will be just 20% in the overall country’s average gas basket price if 750 million cubic feet of gas per day (mmcfd) is imported. ILLUSTRATION: JAMAL KHURSHID
ISLAMABAD:
Amid sanctions imposed by the United States, Iran has given a concession allowing payment for gas under the Iran-Pakistan (IP) gas pipeline project in currencies other than the US dollar.
According to a report compiled by the petroleum ministry in response to a report prepared by the Sustainable Development Policy Institute (SDPI), India was still part of the IP gas pipeline officially as the modalities between Iran and India for the supply of gas, including gas price, were still under discussion. The petroleum ministry said that the SDPI report was based on false assumption and misleading.
“Whether India has any objection to the gas price being negotiated between India and Iran, officially we do not know, but the Indian consumer is happy to pay $14 per million British thermal units (mmbtu) of LNG, excluding re-gasification, transportation and margins (based on prices) for the month of October 2013,” the petroleum ministry said in the report, adding that this price is about 81% of the oil parity in energy content basis, at an oil price of $100 per barrel.
The petroleum ministry said that the contract price of crude oil imported by India was in US dollars, however due to the hassles in payment transmission due to Iran’s geopolitical situation, India and Iran agreed to convert the US dollar value of payments to the equivalent in Indian rupee.
“The IP Gas Sales Purchase Agreement (GSPA) signed on June 5, 2009 also includes payments in currencies other than US dollars giving Pakistan the flexibility to make payments in a currency appropriate to the situation,” the petroleum ministry report added.
It said that an economic analysis of Iranian gas demonstrated that if the furnace oil-based power generation is replaced with imported gas, it will result in annual savings of $2.4 billion. It also said that the incremental impact of the price of IP gas will be just 20% in the overall country’s average gas basket price if 750 million cubic feet of gas per day (mmcfd) is imported.
“With the projected cost of the project at $1.8 billion, the savings render the project’s payback period less than a year,” the ministry said, adding that the SDPI report asserting an additional cost of $4.2 billion was misleading.
The petroleum ministry said that though price discussion between India and Iran is confidential, based on the updated market information the price at which Turkmenistan was selling gas to Iran at the border was conservatively about $11 per mmbtu.
Published in The Express Tribune, November 7th, 2013.
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COMMENTS (11)
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IPI has become IP and then became I only last week. Iranian minister last week said that he is not hopeful about the project success due to delays and absence of financing at Pakistani side.
Comparing "output cost" of this project with extremely expensive furnace oil option for electricity production is like comparing apple and oranges.
Why it is not compared with other cheap options for electrcity production like hydral, nuclear and coal ?
People having severe shortage of competency, knowledge and ability are sitting on the key positions within the governement........a very frustrating situation for people of Pakistan !!
One way out could be for India to build India-Pakistan-Iran pipeline and then for Iran to pay for using the pipeline to supply gas. This way, both India and Pakistan would earn extra kudos!
@naeem khan Manhattan
Perhaps India could have the pipe line coming from Iran to India in the sky but should not be over Pakistan’s territory.
Ever heard of the term "under-sea pipeline"
Saudi petro dollars and pakistani indecision will never let the pipeline be built
@Mr. Hat Servant: Hahaaahh! Well said. Have a nice day and Salams
A golden opportunity to get it right. Annoy your sponsors.......Saudia and USA. Salams
"IP gas pipeline: Iran to accept payment in currencies other than dollar" ++++++++++++++++++++++++++++++++++++++ Completely irrelevant article. There is no clarity on the financing of the Pakistani side of the pipeline ....so the currency of payment for gas is theoretical.
It would be foolish for India to invest on pipeline coming through Pakistan considering they way Imran Khan is trying to blackmail US or whatever he is trying to do by threatening to block NATO route.
I don't see the need to include India in this pipe line deal between Iran and Pakistan. India has withdrawn its option long time ago and even objected to the safety of pipe line going through Pakistan. Perhaps India could have the pipe line coming from Iran to India in the sky but should not be over Pakistan's territory. I think Pakistan should concentrate on their economy looking towards west and not toward India, India is stabing us in the back in Baluchistan and we should never forget that.
How about accepting payments in Monopoly Money?
Pakistani ruppee...... Hot notes straight from the printing press?!