Paying the price: Gulf eyes Iranian gas as Pakistan delays imports

Published: September 1, 2014
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Iran and Oman have sealed a $60-billion agreement under which Muscat will purchase natural gas from Tehran over the next 25 years. PHOTO: STOCK IMAGE

Iran and Oman have sealed a $60-billion agreement under which Muscat will purchase natural gas from Tehran over the next 25 years. PHOTO: STOCK IMAGE

ISLAMABAD: 

The real war between Iran and the United States, which is supported by many European countries, appears to be over energy supply deals. Under some projects, Iran will be connected to European states, Oman, Iraq and Kuwait by sharing its vast energy reserves.

Iran and Oman have sealed a $60-billion agreement under which Muscat will purchase natural gas from Tehran over the next 25 years. The project includes laying a pipeline costing $1 billion across the Gulf.

The agreement was reached during the visit of Iranian President Hassan Rouhani to Muscat in March this year. Around 50% of the gas to be exported to Oman, will be transported onwards to Japan, South Korea and India.

In June, Kuwait became the second country in the Gulf that announced its desire to buy natural gas from Iran, which sits on one of the largest gas reserves in the world.

The eagerness for energy cooperation comes in the backdrop of a historic deal between Iran, the US and five other world powers over the former’s nuclear programme on November 24 last year. Iran accepted strict constraints on the nuclear programme for the first time in a decade in exchange for partial relief from sanctions.

Later in December, Turkish Energy Minister Taner Yildiz said in a statement Iran was planning to lay a pipeline to ship gas to European nations that were interested in imports. If the programme is agreed and the US and other world powers reach some arrangement with Iran, Pakistan’s long-standing hopes of importing Iranian gas may be finally buried.

The Iran-Pakistan (IP) gas pipeline has been stuck for years in the wake of US threat of sanctions. Though Islamabad sought some concessions from the US to clear the way for building the pipeline, but the request was rejected outright.

The deadline – December 2014 – for the start of gas flow under the IP project is approaching fast and Pakistan may face penalties of millions of dollars every day in case of failure to complete its part of the pipeline. Iran has laid its portion of the pipeline.

In place of Iranian gas imports, the US has suggested that Pakistan should consider purchasing liquefied natural gas (LNG) from Qatar and other sources, but it is not a cheaper source of energy.

Crucial talks in Sept

The PML-N government, however, is trying to make some arrangements with Iran to win an extension in the deadline and keep the project alive. The two sides are expected to meet next month to discuss some important proposals, which may pacify the Iranian government, which is upset over failure of Islamabad to start work on the project.

Pakistan insists that it could not press ahead with the project due to the lingering threat of sanctions. Now, it has proposed to Tehran to construct the pipeline from the Gwadar Port under the guise of LNG export, which could be connected to Iran after the sanctions are lifted.

According to an official assessment, the gap between demand and supply of gas is widening in Pakistan and production is expected to drop to about half the existing levels by 2020 if new reserves are not tapped and output is not increased from existing fields.

Gas production will fall from the current 4.47 billion cubic feet per day (bcfd) to 2.53 bcfd in 2019-20 if fresh supplies are not injected into the system.

Experts are of the view that Pakistan should tackle the issue strategically and take it up again with US authorities. They ask why Islamabad is being pressurised when other countries are clinching deals with Iran.

These countries have made economic policies part of their foreign policies and Pakistan should also follow them in securing energy supplies. Otherwise, it will lose an opportunity to secure cheaper gas imports and its economy will collapse under the weight of energy shortages.

The writer is a staff correspondent

Published in The Express Tribune, September 1st, 2014.

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Reader Comments (24)

  • Char Latan
    Sep 1, 2014 - 4:28AM

    Oh wait!!! What about Pakistan’s strategic location at the cross roads of Persia, Central Asia, South Asia and whatnot??? How can all of this bypass Pakistan? Pakistan should at least be paid a royalty.

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  • Raj - USA
    Sep 1, 2014 - 5:36AM

    Pakistan’s Kashmir policy and enmity with India is costing Pakistan very dearly. No doubt it has harmed India also but the harm caused to Pakistan will turn out to be much more. It is these policies of Pakistan and its perpetual hatred for India that motivated it to install taliban government in Afghanistan and sheltering terrorists from all over the world in its territory. It scuttled IPI pipeline and IP pipeline could not materialize. If this continues, India and Afghanistan will move away from Pakistan’s land route. Then Pakistan will be left with a ideally situated land route that no one willing to use, resulting in no trade activities through that route.

    It would be better for Pakistan to come to an agreement with India by accepting all territories that India now controls as India’s and all territories that Pakistan now controls as Pakistan’s. This will also bring Pakistan better relations with Afghanistan as it will not find it necessary to have a strategic depth there. Overall effect of having good relations with its eastern and western neighbors will be a positive effect on its relationship with Iran also. It will benefit all countries, viz. India, Pakistan, Afghanistan and Iran. However, this is very unlikely to happen.

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  • Bakhtiyar Ghazi Khan
    Sep 1, 2014 - 9:09AM

    You can thank Indian pressure on Iran and American pressure on Pakistan for the lack of progress on the IP pipeline. Unfortunately, Iran is seeking alliances with anti-Muslim states which has cost them to lose local support in Afghanistan, Iraq, Syria, and Palestine.

    @Raj – USA: Pakistan is an independent nation. We are not one of your proxies which you can bully like Bangladesh, Nepal, or Bhutan. Pakistan is more than capable of defending itself from any external threat. We know Indians never have Pakistan’s interests at heart. We learned that from 1947 when you massacred 1 million Punjabi and Kashmiri Muslims only because we wanted our own country. Pakistanis and Kashmiris know the truth about Indian hatred for Islam, Muslims, and the Muslim world. The rest of the world will learn it with time.

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  • Akbar
    Sep 1, 2014 - 9:20AM

    If Turkey, the strongest ally of the US can continue to import gas from Iran despite sanctions and make payments through Halkbank why on earth Pakistan is thinking twice. If India can continue to import oil and make payment through UCO bank in Calcutta in Indian Ruppee account why PML N govt has a probelm. If China didnt cut down its imports from Iran despite the sanctions why Pakistan is dragging its feet. If Russia can sign a $30b deal just two months bank why Pakistan feels handicapped. Let me think …..or is it Saudi the spiritual father of PML N.

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  • asim
    Sep 1, 2014 - 9:29AM

    Pakistan’s energy problem can be solved by getting gas from Iran.

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  • Urooj
    Sep 1, 2014 - 9:48AM

    I totally agree with @Raj even though I am a Pakistani. Pakistan could have been re exporting the gas instead of Oman if we had played our cards well. Indian held Kashmir will never be a part of Pakistan so lets understand that fact and move on from that dream. Instead of fighting for Kashmir we should get our house in order first and maybe later become vocal for the rights of the Muslims and others.

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  • Hasan
    Sep 1, 2014 - 9:58AM

    @Bakhtiyar Ghazi Khan:
    Before you say Indian, please know there are many Indian Muslims also, like including myself. I love India and proud to be an Indian Muslim :)

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  • vasan
    Sep 1, 2014 - 10:03AM

    Bakhtiar ghazi Khan. : I wonder whether muslim countries will cooperate with each other ever because of high religious/sectarian indoctrination. Unfortunately such indoctrination was supposed to play up against the rest of the world. But due to shortsighted policies of muslim countries and due the weightage of economics over religion, other muslim countries have turned partially away from such wrong policies but Pakistan is yet to. Take it from us, Not India or for that matter no country will have any body else’s interest in their heart. It is not a love affair. Hard core economics is what counts. The welfare of the nation state is of paramount importance to any country except ofcourse Pakistan. Remember Pakistan too massacred millions of hindus during partition and millions more in Bangladesh war inspite of them being muslims. Even during the Afghan war and after Pakistan is killing thousands within its own and other territories. And to cap it Pakistan is driving all its minorities away from Pakistan. While no sane muslim from any part would like to migrate to Pakistan, Sindhi hindus are in a beeline to move over to India at the same time. You can draw your own conclusions from these facts. There is no love or hate relationship between countries, it is economics and only economics. The faster you learn the better it is for you. But your post suggests otherwise. The rest of the world knows these facts and even muslim countries know these facts. That is why India has better relations with many muslim countries than Pakistan can ever hope to have.
    ET Pl publish this rebuttal to Mr Khan

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  • vinsin
    Sep 1, 2014 - 11:02AM

    @Bakhtiyar Ghazi Khan:
    Then how come Indian muslims are alive and growing? Then why India saved Bangladeshi Muslims and gave refuge to Palestinians. Then why India created pakistan and gave more than 25% of its land as per population at that time.

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  • jay1980
    Sep 1, 2014 - 11:29AM

    @Bakhtiyar Ghazi Khan: Pakistani love to play the dumb victim ! Keep up your act,Pakistan makes a perfect example of what a country should not be !

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  • Soldier
    Sep 1, 2014 - 11:47AM

    Wow india create pakistan? Amazing ! For ur kind information we got pakistan and azad kashmir after a long struggle.It is not gifted by u.

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  • Ali-Dubai
    Sep 1, 2014 - 11:49AM

    @vinsin:
    If india is such a generous then why not release Kashmir, UP Muslim populated areas…
    Why Muslims are not getting jobs in public sector according to there population?
    Why there is no action against hindu Extremist who killed Muslims in Gujrat?

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  • Sashi
    Sep 1, 2014 - 1:02PM

    @asim- you almost got it right, mate , but for one letter “m”. Your post should’ve read – Pakistan’s energy problem can be solved by getting gas from Imran – considering what an incredible kind of a gas bag he has turned out to be.

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  • nrmr44
    Sep 1, 2014 - 2:02PM

    @Bakhtiyar Ghazi Khan:
    The threats you should be fearing are your dissolution as a nation-state, the collapse of your economy, a life without basic amenities, and a society without visible skills. How would you like to celebrate the independence that results from no one wanting to deal with you?

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  • UP wala
    Sep 1, 2014 - 2:24PM

    @Ali-Dubai: Your suggestion, to let all UP Muslims to be allowed to go to Pakistan is amusing. Mind you Muslim population in UP is more than India’s national average. If all UP Muslims are allowed to settle in Pakistan, than Mohajir will become majority beating Punjabi.

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  • sharabi
    Sep 1, 2014 - 3:34PM

    @Ali-Dubai
    who told you? My previous Boss was a Muslim (Now he is in Adani), & i am also a muslim.

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  • Bakhtiyar Ghazi Khan
    Sep 1, 2014 - 4:38PM

    Too many Hindu fanatics pretending to be Muslims. They act like India gave Pakistani independence willingly. Why then the need for Quaid e Azam and Muslim League to fight so hard? Why are Hurriyet Conference in Kashmir still struggling for independence after 67 years?

    India did no favor to Muslims by funding ethnic and racist divisions between us in Bangladesh. I still remember many of our Pashtoon, Punjabi, Sindhi, Baloch, Bihari Muslim brothers were tortured by India in Bangladesh following 1971. Indians forced them to eat food mixed with broken shards of glass and kept them dehydrated against UN human rights for prisoners of war.

    Indian government, media, and army still wants Indian Muslims to prove they are more anti-Pakistan than Hindus. If any Muslim cheers for Pakistan, then he will be beaten, abused, and charged with false charges.

    India never has goodwill for any Muslims, especially Pakistanis, Kashmiris, Indian Muslims, and Bangladesh. Modi admitted it himself in his numerous speeches. We are not blind.

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  • vinsin
    Sep 1, 2014 - 8:38PM

    @Bakhtiyar Ghazi Khan:
    what about Indian POW still in pakistan since 1965? Why India tried to save Bangladeshi Muslims? Why Indian Muslims in India after partition? Why Indian Muslims want to cheer for Pakistan? If India didn’t give pakistan willingly then how it was created? Where is the history of Muslim league fighting so hard? Why Pakistani Army praised Indian Army for its treatment after the 1971 war. Why no case is running for treatment of POWs against India in UN? Then why Indian Muslims voted for Modi? Why India allowed Indian Muslims to stay after partition? You are saying that Muslims got Pakistan then what exactly is Hurriyet is then fighting for?

    Please publish. Can you prove that Hindu fanatics pretending to be Muslims?

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  • Sexton Blake
    Sep 2, 2014 - 6:18PM

    I suppose it is somewhat embarrassing that Pakistan allows itself to be a compliant lackey of the US in regard to the pipeline and most other matters, but at least Pakistan has lots of companion puppets. Just to name a few would be the UK, most of the EU, Canada, Australia, and Japan.. The only country which has stood up to America in recent times, and is considered to be one of the good guys, is India when one of its diplomats was treated badly. Pakistan did show it knows how to stand up to America after the tragic border attack near Salala village in 2011, but has now dropped back to its subservient role..

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  • someone
    Sep 2, 2014 - 10:20PM

    @Bakhtiyar Ghazi Khan:
    There was no pressure on Iran by India. India just wanted to pay the price of gas delivered at Indian door step and not the one left Iran. Both Countries knew the situation of Pakistan. But since Pakistan was/is not a very reliable transit partner, both India and Iran are working on underwater pipeline from Iran to India. It may be costly but could be beneficiary in longer run. But a philosophy of mutual interest and live and let live is hardly appreciated in Pakistan.

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  • Shah
    Oct 18, 2014 - 7:07AM

    @vinsin: Pakistan Was Created As A Result of The Political Struggle of The Muslims Not Some and Bangladesh Separated Because It Was Un Natural Arrangement From Day One To Have Two Geographically Separate Your Other Questions Are Just Idiotic

    @Sexton Blake: Pakistan Was Still Able To Extract An Apology Over Salala But India Was Never Able To Get Their Diplomat Out Nor Get An Apology

    @jay1980:And India Loves Living In Delusions and Dreams

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  • Shah
    Oct 18, 2014 - 7:10AM

    @nrmr44:
    Dissolution Threat Is Coming From The Troll Of Country Half Of Which Is Under Rebellion
    Very Funny

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  • vinsin
    Oct 18, 2014 - 11:14AM

    @Shah:
    You just said what I said and then calling the question idiotic. Nowhere asked for reasons for creation of Bangladesh. You haven’t answer any question.

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  • ayesha
    Nov 25, 2014 - 5:25PM

    it is the over influenc eof US and saudi government that is isolating bother iran and pakistan from each other and rest of coutries. Pakistan must learn from past, and understand even the policy of saudio government. whtever iran pak ipp is a great lost.

    Pakistan has world’s second largest coal deposits of 185 billion tons. These are estimated to be equivalent to 618 billion barrels of crude oil. This is more than twice if we compare it with oil reserves of Saudi Arabia. If it is converted into oil by gasification, it will generate 650 barrels of crude oil which at an average market rate of eighty dollars per barrel, would generate 5.2 trillion dollars. .(World Times: writes Irshad Ali Sodhar in his article Pakistan Rich in Natural Resources But Poor in their Management Thursday September 1, 2011) Notwithstanding the fact here, of course the Saudi Arabian government’s interference in the politics of Pakistan is not hidden from the world, it can be analyzed in many terms, one of them is question of natural resources of Pakistan. But the policy making elite of the country has not only been oblivious to the potential but also indifferent to the slow pace of efforts made for this source for energy production and exports. The energy deficit is badly affecting the industry in country but no any serious initiative is taken for electricity production from coal. China imports its 65 percent of coal requirements but despite being ‘all weather friend of Pakistan’, this giant energy importing economy does not import coal from Pakistan. No one knows Why?
    The geography of Pakistan allows it with the renewable energy resources. Wind and Solar energy are other unused lifelines of Pakistan. 1046 km long coastal line gives potential of 40000 MW of electricity. The vast lands of Baluchistan can be utilized for solar electricity generation. But these resources have not been used due to technological backwardness and failures of agreements with neighboring government of Iran. Most recently too. This is a political conspiracy too against Pakistan and Iran to isolate them from one

    well nawaz sherif is the busiess venutrist, he has no vision excep making motorways, and he is busy in taing loans of 12 billion whil doesn know how will he allocate them and where. what about our own resources in baluchistan. great man, first u elect nawaz sherif then u lament.! RIP economics progress in pakistan

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