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Iran-Pak Refinery and Turkmenistan gas pipeline

  1. Iran-Pak refinery and Turkmenistan gas pipeline
  2. Boosting the economy through agriculture
  3. Down-sizing in the Govt. departments

Mar 13 - 26, 2000

A high-powered Pakistan delegation of the Ministry of Petroleum is currently visiting Iran to weed out problems regarding $1.1 billion Iran-Pak Refinery project which is to be established at Gaddani beach adjacent to Hubco Power Project.

The delay in establishing the project has however provided a cost relief to the two countries as due to slump in refinery sector and technology advancement in refinery sector by China and other European countries altogether have resulted in dropping the cost of the refinery project. According to an estimate, the cost of Iran-Pak Refinery has come down from $1.1 billion to $850 million.

The Joint Venture Agreement(JVA) between Iran and Pakistan for setting up Iran-Pak Refinery was signed in 1996. This important project from Pakistan's point of view continued to suffer an uncalled for delay for one reason or the other. Soon after the signing of the project, there was a difference of opinion about proposed location of the project as some of the government officials were interesting to shift the proposed project from Gaddani beach to Port Qasim. However the proposal of shifting the location was strongly opposed due to refinery may add to the congestion around Port Qasim which is not affordable from strategic point of view. The shifting of the project was also opposed by the then government of Balochistan. In 1998 when the government offered 25 per cent guaranteed rate of return to Pak-Arab Refinery being established near Multan, the Iranian partners also demand for the same rate of return. Although the government conceded to the demand and allowed similar rate of return to Iran-Pak Refinery Project, however this facility was capped for 3 years for Iran-Pak Refinery while the PARCO was allowed the facility for 8 years. Consequently the project gone into a deadlock again as it was naturally taken as a discrimination with the Iran-Pak Refinery Project.

No one can deny the fact that Pakistan's economy which has to pay heavily on import of oil, round $2.5 billion for the current fiscal year is not in a position to continue to bear this burden. The country will have to develop its own resources save precious foreign exchange required to survive economically.

Although the negotiations between the two countries are going on for carrying out the project without any further delay however the budgetary allocation in the forthcoming budget of Pakistan will confirm about the seriousness of the government in this project. It may be recalled that the previous government had not made any budgetary allocations when it passed the federal budget in June 1999. The budgetary allocations for this project two years back were utilized for some other expenditures instead of the refinery project.

Former government had set a budget target of Rs63.3 billion for the energy sector which was 48.4 per cent higher as compared with Rs43.4 billion of the previous year. It is yet to be seen how the present government led by Gen. Pervez Musharraf deals the oil and gas sector in the forthcoming federal budget for 2000-2001.

Another delayed project in the energy sector is $2 billion Pakistan-Turkmenistan gas pipeline project which was signed in 1997. Although the pricing agreement for purchase of gas has also reached between the two countries and an International Consortium was also willing to invest in this project yet the unending political disturbance in Afghanistan from where the proposed pipeline has to pass through continued to stall this project to be materialized. The continued political disturbances in Afghanistan scared the investors consortium led by the US company Unicol which has backed out of its earlier offer.

Boris Shikmurdaov, foreign minister of Turkmenistan who recently visited Pakistan had a meeting with Petroleum Minister Usman Aminuddin and discussed matters relating to mutual interest with particular reference to the proposed gas pipeline project.

Both sides agreed to weed out the hindrances impeding the early implementation of the project and committed to work closely and to further strengthen bilateral relations between the two countries.

The proposed massive 1464 kilometer gas pipeline plans to bring 20 billion cubic meters (700 billion cubic feet) of gas from southern Turkmenistan to Multan.

The two countries attach great importance to an early commencement of this project which is pending since the mid 90s. Currently the two countries are focusing for maintenances of durable peace in Afghanistan. The peace in Afghanistan not only of vital importance for this gas pipeline project but also important for strengthening economic ties with other Central Asian States.

The Turkmenistan president, during his visit to Pakistan in March 1995 had signed a memorandum of understanding for the gas pipeline project. The feasibility of the project was also completed and some foreign companies had shown interest in funding the project but work on the proposed project could not start.

In October 1997 the two countries had signed a price agreement under which Turkmenistan had agreed to deliver gas to Pakistan at Multan for minimum $1.65 to maximum $2.05 per million BTU( British Thermal Unit).