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Iran-Pakistan gas pipeline accord: a significant step in the right direction

Iran-Pakistan (IP) gas pipeline project has entered the implementation phase following finalisation of US $7.5 billion gas project, on June 13, 2010. Dubbed as the “peace pipeline”, it will start supply of natural gas to the country from 2014.

The landmark agreement was signed by Iran’s Deputy Oil Minister Javad Ouji and the Pakistani delegation in Tehran. If things proceed as per plans, the country will have an intake of the first flow of Iranian piped gas in its system by mid-2014 and 100 per cent or 750 million cubic feet (mmcfd) gas per day by the end of 2015. The gas volume imported from Iran will be nearly 20 per cent of the current gas production and the supply is for 25 years, renewable for another five years. The agreement also provides for increasing the quantity of gas to one billion mmcfd of gas per day.

Pakistan has to construct about 700 kilometre pipeline from Point 250 KMS at Pakistan-Iran border, traversing along the Makran Coast Highway to connect with its existing transmission network at Nawabshah. Estimated to cost US $1.65 billion, a 42-inch diameter pipeline is planned to be built over a period of three years, preceded by a year-long feasibility study.

Iran’s deputy oil minister told reporters at the contract signing ceremony in Tehran that from June 14, 2010 Iran would start building the next 300-kilometre leg of the pipeline from the south-eastern city of Iranshahr to the Pakistani border, through the Iranian port of Chabahar. Iran has already constructed 907 kilometres of the pipeline between Asalooyeh, in Southern Iran, and Iranshahr, which will carry natural gas from Iran’s giant South Pars field.

The project is crucial for the nation to avert a growing energy crisis; already causing severe electricity shortages in the country and the project would help generate around 5,000 megawatts (MW) of electricity.

The use of Iranian gas for thermal power generation will provide the solace of US $1.5 billion when it replaces the competitive fuel (LSFO, HFSO) being used in power generation. However, the imported gas would not be economically viable for domestic use because of its higher price.

Currently, Iran produced 600 million cubic metres of natural gas, of which 430 to 440 million cubic metres was consumed domestically. Iran plans to raise its output to 900 million cubic metres over the next three years with the expansion of South Pars and hopes to further hike it to 1,100 million cubic metres by 2015.

Pakistan is currently facing a daily shortfall of over 400 mmcfd of gas, which is projected to increase to four billion cubic feet by 2025. To meet the shortfall and also to cater to the future energy needs, the country has been considering and probing, since mid-1990s, various options for the import of natural gas through pipelines. Amongst these options, the notable ones included: Turkmenistan-Afghanistan-Pakistan-India (Tapi) gas pipeline, Iran-Pakistan-India (IPI) gas pipeline and Qatar-Pakistan under-sea pipeline. Islamabad has also been contemplating on importing 3.5 million cubic feet of liquefied petroleum gas per day from Qatar. It is estimated that this project will entail an expenditure of $2.0 billion annually.

Experts maintain that Pakistan’s future can be secured by meeting its energy needs adequately. According to conservative estimates, the country is presently suffering a loss of Rs45 billion annually due to the continuing energy crunch. If plans to import gas for meeting the country’s needs for electricity and gas are not implemented immediately and its indigenous gas resources are not fully and expeditiously exploited, the loss can increase manifold.

Furthermore, the construction of IP pipeline will create job opportunities, vocational training and health facilities, and social uplift in the backward areas of Balochistan and Sindh. Being an environmental friendly fuel, the natural gas fuel will also ensure substantial carbon credits. 

Meanwhile, India and Iran are reportedly holding talks on building a gas pipeline between the two countries along the bed of the Arabian Sea. The carrying capacity of the gas pipeline’s first leg will total 31 billion cum annually, with the cost of construction estimated at $4.0 billion.

India and Iran were discussing the delivery of natural gas produced in Turkmenistan with Indian assistance to North Iran; while the Islamic Republic will send natural gas from its southern deposits to Indian consumers. Under the project being worked out by South Asia Gas Enterprise Private Ltd (SAGE), the gas pipeline will be 1,100 km (684 miles) long. The pipeline will start from Chabahar and will deliver gas to consumers in Gujarat.

The natural gas extracted from different gas fields contains traces of vapours of other combustible gases that have to be separated from methane gas before pumping it into the gas distribution network. Liquefied Petroleum Gas (LPG) is a mixture of these separated gases. But LPG plants have not been installed at many gas and oilfields in the country and impure gas, equivalent to 500 tons of LPG, is burnt in the air daily before pumping pure methane in the gas distribution system. The daily loss of 500 tons of gas, at current rates, comes to over Rs2.5 billion.

However, according to experts, Oil and Gas Development Co. Limited (OGDCL) has the infrastructure for substantially increasing its exploration activities and also the potential to make the nation self-sufficient in oil and gas within 10-15 years, if it adequately plans acquisition and training of additional technical manpower and equipment over a period of 5-8 years and productive wells are discovered.

For realising this goal, it is, however, imperative for OGDCL to acquire the services of a fully qualified and adequately experienced exploration and production management team, and allowing them the independence to make technical and financial decisions solely on merit and in the national interests of the country, without unnecessary interference from official quarters, both upper and horizontal.

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