Iran has not much gas for sale, Pakistan must act swiftly

Published: August 24, 2015
SHARES
Email
The government needs to kick-start the IP project and persuade Iran to save the vital fuel for Pakistan, which can also earn transit fee from the pipeline that will pass through its territory to India. PHOTO: FILE

The government needs to kick-start the IP project and persuade Iran to save the vital fuel for Pakistan, which can also earn transit fee from the pipeline that will pass through its territory to India. PHOTO: FILE

ISLAMABAD: The lifting of economic sanctions from Iran will give Pakistan a unique opportunity to address acute energy shortages with the help of gas imports through a pipeline from the Gulf state.

The revival of the Iran-Pakistan (IP) pipeline project and its early development seem to be the most economically justified and greatly support the national interest.

Iranian Foreign Minister Javad Zarif visited Pakistan a few days ago where he expressed the desire for an early building of the pipeline.

“We have conveyed our resolve to the Iranian foreign minister that we are committed to implementing the gas pipeline project after sanctions are lifted,” Petroleum and Natural Resources Minister Shahid Khaqan Abbasi told The Express Tribune.

Read: China-funded LNG project to turn into Iran-Pakistan gas pipeline: petroleum minister

The foreign minister stressed that economic restrictions would be removed soon following a landmark nuclear deal with global powers, he said.

At present, Pakistan mainly depends on thermal power plants that consume expensive furnace oil and high-speed diesel. Power production with the help of comparatively cheaper Iranian gas will not only lead to a reduction in the oil import bill, but will also bring down the electricity consumption cost of power consumers, who are still bearing high tariffs despite plunging oil prices.

Apart from the soaring bills, the critical energy supply and demand situation has left some of the country’s major cities without electricity for almost 12 hours a day, suggesting that the country’s electricity and gas needs are real and Iranian gas is the best available option.

Pakistan faces over 7,000-megawatt power shortfall in the peak summer season that causes blackouts in many areas and cripples life and business. Estimates suggest that the energy shortage strikes 3% off economic growth every year.

Under an agreement, Iran will supply 750 million cubic feet of gas per day (mmcfd) to Pakistan and the volume will be enough to generate 5,000MW of electricity. Later, supplies will be boosted to one billion cubic feet per day (bcfd).

With the completion of the IP pipeline, government estimates say, the country will save $1 billion in oil imports every year, taking total savings for the project’s 25-year contract period to $25 billion.

Of the gas import from Iran, Balochistan has sought 250 mmcfd for consumption at the Gwadar Port, the control of which has been handed over to a Chinese company. The government is planning to set up duty-free economic zones in the coastal city of Gwadar and Iranian gas will provide a major boost to economic activities there.

In addition to electricity shortages, the country endures gas scarcity that reaches its peak in winter when even domestic consumers are left scrambling for the vital heating and cooking fuel.

Read: Too soon for ‘illogical’ US to return to Tehran: Iran

According to a government study, gas production will plunge from 4 to 2 bcfd in 2020, which underlines the need of immediate gas purchase from Iran.

Right decision

The Iranian gas can satisfy more than 40% of Pakistan’s appetite for energy and this will automatically spark industrial development, end electricity outages and significantly increase Pakistan’s credit rating. But the government should swiftly act and make a right decision because Tehran right now has not much gas for sale as exploration activities had screeched to a halt in the wake of international sanctions.

The United States is engaged in intense lobbying in the European Union to persuade the 28-nation bloc to meet its energy needs through Iran and rely less on Russia.

Iran is already providing gas to Turkey and is also enthusiastic about gas export to Europe in the next five to ten years. European nations are willing to stop buying Russian gas and in this case they will definitely try to source supplies from Iran.

At the same time, Pakistan cannot afford to invest in the exploration of fresh hydrocarbon deposits given the huge capital injection and long time needed.

The government needs to kick-start the IP project and persuade Iran to save the vital fuel for Pakistan, which can also earn transit fee from the pipeline that will pass through its territory to India, which is likely to join the project. India had earlier pulled out following a civil nuclear energy agreement with the US.

Pakistan should push for a regional energy pact involving Iranian gas and also keep in view its national interest. However, the US will continue to pile on the pressure because the IP pipeline is considered a big threat to its interests in the region.

The writer is a staff correspondent

Published in The Express Tribune, August 24th,  2015.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.

Facebook Conversations

Reader Comments (22)

  • unbelievable
    Aug 24, 2015 - 4:47AM

    If Pakistan performed std due diligence before signing the IP it would have noted that Iran doesn’t produce enough gas to satisfy it’s own domestic consumption during the winter. A simple phone call could have revealed that Turkey gets it’s Iranian gas supply cut off during the winter (when Turkey actually needs the gas). Recommend

  • Dodo
    Aug 24, 2015 - 5:52AM

    Do we really want to invest in relationship with an unstable basket case line Iran? Shouldn’t we explore better alternatives or explore within? Recommend

  • Kiwi
    Aug 24, 2015 - 8:36AM

    @Dodo:
    No we shouldn’t. As the article rightly points out domestic exploration requires a HUGE capital as well as a long amount of time. Pakistan doesn’t have any of those right now.Recommend

  • Tore
    Aug 24, 2015 - 9:47AM

    To be honest, Pakistan does not deserve Iranian gas. Pakistan has hatred opportunity while building gas pipeline to Iran and import Iranian gas, but PPP and PML-N governments more than any other country in the world followed instructions from point to tingle and done nothing with IP project.

    No more correct that 28 European countries through the EU buys up all Iranian gas and Pakistan remain gasless.Recommend

  • shahid
    Aug 24, 2015 - 10:07AM

    @Dodo:
    Absolutely not, never trust persia, persian have never been trusted, as persia/Iran is nobody’s friend.. read the history, and soon all will realize that.. at present for being american baby with hindu-stan jumping on the bandwagon they are going to develop Chabahar port to have access to afghanistan through iran, so much for shia sunni rivalry. As far as afghans are concerned they are the most untrustworthy lot among the pigeons; read tuzk-e-babri written 1300 years ago; As far as Pakistan is concerned, it needs to have plan-B, which is TAPI line with shell, mobil, texaco, chevron; This line to be put in by Russia and paid for by Pakistan and China under the CPEC agreement will be far more reliable than from the shop of iran gas. If iran wants, they can sell, otherwise for the moment they can sell to their new loverboys from europe and america. When these loverboys will spit in iran’s backside, force iran to do things they iranians dont want to do, then them iranians will run and come to daddy. Till then, enjoy and watch the show; Recommend

  • Saud
    Aug 24, 2015 - 10:40AM

    Self contradictory article. It says Pakistan should hurry and then mentions sanctions still in place on Iran. It says US pressuring Europe to buy Iranian Gas and then says US wont let Iran sell gas to Pakistan. Says India pulled out of the Iran gas agreement and then says Pakistan would earn transit fee from gas supply to India!Recommend

  • Karachi Wally
    Aug 24, 2015 - 11:13AM

    @shahid:
    Which Tuzuk-e-Babri was written 1300 years ago, Babar died in year 1500 that is 500 years ago. You should not be Shia hater all the time particulalry when discussing the issues of economics and trade. Peace!Recommend

  • TN
    Aug 24, 2015 - 11:30AM

    Thar is sitting on huge coal reserves and it contains coal bed methane gas (CBM).
    USGS estimates that Thar alone has over 20 TCF of CBM and foreign companies have shown interest BUT our govt has to give some incentives.
    We have to get our act together.
    Allah has blessed us with lot of resources but we always look for foreign source(s).
    Hope and pray that we get some sensible people at the helm of affairs. Recommend

  • UC
    Aug 24, 2015 - 12:01PM

    Sponsored article, Pakistan should build power generation infrastructure based on its own resources i.e.

    Hydro: we have ample opportunities to cap this resource, rather then wasting fresh water off into the Arabian sea.
    Coal: in the short run coal fired power plants based on reserves found in Thar can be used to spruce up the power shortfall.
    Nuclear: If EU can accommodate 40%+ of their Power needs from Nuclear Energy, why cant we.

    Depending on another country for your power needs is susceptible to blackmail from that country. Recommend

  • Haider
    Aug 24, 2015 - 12:40PM

    @Tore
    Pakistan remained neutral in Iran-Saudia proxy in Yemen which is enough to overcome hatred of past…Recommend

  • Dodo
    Aug 24, 2015 - 2:30PM

    @shahid:

    Well said buddy. We can not trust Iran, because their heart is not in right place. They want to be friends with India, US, Europe. They want to be leader of the Muslim world and dictate and control AfPak region.

    We are better off building on our relationship with the real Muslim countries from the gulf. They are the biggest contributor to the exchequer, and our biggest supporters for last 4 decades.

    Let’s not burn our bridges, just to be friend with an untrustworthy and unreliable culture and country. Recommend

  • Dodo
    Aug 24, 2015 - 2:32PM

    @Haider:

    Sorry, it doesn’t wipe out our 40+ year long history with Saudis and rest of the gulf countries. And why would we want to join hand with a Shia country that considers itself a Muslim leader? Recommend

  • Sameer
    Aug 24, 2015 - 2:42PM

    Sorry to burst your bubble, but India have dropped the idea of being part of TAPI….instead we are going for safer n secured sea pipeline…Google about oman Iran India pipelineRecommend

  • tellmore
    Aug 24, 2015 - 4:15PM

    India may not join in any arrangement in which the pipeline passes through Pakistan whether it is IP or TAPI.
    Pakistan can build the pipeline from Iran to Pakistan on its own and enjoy the growth with that gas. It is a pipe dream.Recommend

  • Islamabadi
    Aug 24, 2015 - 4:36PM

    @Sameer
    I just did and as expected there is no change to the pipeline map after Pakistan succeeded in extending its continental shelf (CLCS). The pipeline was supposed to pass at a distance of 200 miles from Pakistan’s coast, which has now been extended by another 150 miles. 150 miles may not seem much but it effectively makes the project nonviable. Passing it at 200 miles at 2.5 miles max depth was stretching the limits already by the way. This project is nothing but scrapped. Why? Coz if it proceeds the pipeline will pass through Pakistan’s territory including the compression platform, giving Pakistan the power to control the flow. If the aim is to avoid Pakistan interference then the project wont deliver on that. If it doesn’t then why not build it on land, if on land then why not be part of the IPI project? Recommend

  • shahid
    Aug 24, 2015 - 6:58PM

    @Sameer:
    Still dreaming are you ??? Russia has signed $2billion for pipeline for TAPI with Pak and China, and Total in Tajikistan already ready to pump gas of which 1,370 BCFD each for Pakistan and Hindus-tan & about 350 BCFD for Afghanistan; so TAPI is oN.Recommend

  • syed & syed
    Aug 25, 2015 - 3:32AM

    @unbelievable Please correct yourselves there is no gas shortage in Iranian. In when the temperature drops to sub zero then certain parts remains out of gas for a very short period which is compensated by gas cylinders and general public is not effected.:US is against Iran therefore IP is pictured as a non feasible page It is immediate solution then TAPI . Recommend

  • Sameer
    Aug 25, 2015 - 10:15AM

    @Islamabadi….India is well aware of Pakistan’s water boundary, so this sea pipeline have nothing to do with pak water boundary….but if you interrupt our sea pipeline, then don’t forget your water flow comes from indian side, so i need not mention what we can do…

    @Shahid….i think you live in fantasy world….you guys may build n enjoy pipeline on your side….but India has dropped the idea of being part of TAPI…..instead it’s working on Oman Iran India sea pipeline…..open your eyes and just googleRecommend

  • Bystander
    Aug 25, 2015 - 10:55AM

    I think some misconceptions exist in our minds about Natural gas. Presently Natural Gas is available at ever decreasing price due to its abundant availability resulting in world-wide drop in prices. With USA producing its own gas in ever increasing quantity, their imports are going down. Read the 2014 article from New York Times;< http://www.nytimes.com/2014/09/30/business/energy-environment/a-u-turn-for-a-terminal-built-in-texas-to-import-natural-gas.html?_r=0&gt; .

    Of course Pakistan needs gas as most countries do. Buying from Iran should be the most economical option if (and a very big IF) honest and professional negotiations are carried out.Recommend

  • bigsaf
    Aug 25, 2015 - 10:17PM

    @shahid:
    @Dodo:
    Your ethnic and sectarian prejudices and views are quite thick…Recommend

  • TiffinBox
    Aug 26, 2015 - 2:13AM

    @sha-hideous you need better understanding of how these things work.Recommend

  • IAK
    Oct 14, 2015 - 5:40PM

    Pakistan has lot of gas if it develops the fracturing technology. We should be working at that rather than being dependent on others. Recommend

More in Business