Trans-border energy proliferation through pipelines
is likely to drive immense of scale of mutual interests in a vast
region of this glob during the 21st century. Asian energy security,
which exerts direct influence on the economy, society, and national
security of all countries in the region, is an important common issue
that confronts all Asian countries in this era. It is no longer a
national issue in the present global scenario, and thus somehow not
easier for a single country to handle the energy problems on its own.
Asia is the world's growth centre and its economic
development and growing energy demand is likely to continue in the
medium and long run.
From the second half of 1980s, Asian energy
consumption has kept growing and lately weighted as much as a quarter
of the world consumption. However, it was decreased because of Asian
economic crises in the second half of 1999, and then constant energy
demand has risen each year.
The world, on the other hand, is facing significant
changes regarding gaseous energy and technology. Natural gas and other
gaseous fuels are already seeing a significant increase in demand
which had change the market structure rapidly. The three driving
forces behind these changes are deregulation (liberalization) of
energy markets, widespread environmental concerns, and new technology
developments. The substitution of natural gas to coal and petroleum
products as an environmentally-friendly fuel with lower emissions has
been gaining momentum in developed as well as in developing countries
in the past two decades.
Natural gas has had a major impact on the balance
of energy in North America and Europe in the last two decades. In
2000, North America with 5 percent of the world reserves produced
nearly 32 percent of the world gas. In comparison, the Middle East
with over one-third of the world's gas reserves has produced only 8
percent. last year. This imbalance has been partly due to the
geographical distance between the Middle East gas producers and major
gas consuming countries.
The emergence of huge potential gas market in
India, Pakistan, Turkey, and within Middle East is likely to change
this imbalance in the coming years. It is now widely believed that
natural gas from the Middle East countries will play an important role
in supplying part of the increasing energy needs of Indian
sub-continent in the twenty-first century.
Most of the growth in world gas reserves has come
mainly from two areas: the former Soviet Union including Caspian Sea
and the Persian Gulf states. Following them Russia, Iran, Qatar, the
United Arab Emirates, and Saudi Arabia have the second, third, fourth,
and fifth largest reserves in the world respectively.
Energy requirements of both India and Pakistan have
been rising during the last 10 to 15 years at the rate of 6 to 7 per
cent annually. India's current energy demand is about 310 million
tonnes oil equivalent and is expected to be doubled in 10 years. At
present, India is importing a quantity of 68 million tonnes of oil
that will also be doubled to 154 million tonnes during next ten years.
Pakistan's energy needs are about 44 million TOE per year and these
are expected to be doubled in the next 10 to 12 years. Pakistan is
importing about 18 million tonnes oil per annum.
At present, the demand for gas in India as
Hydrocarbons Visions-2050 shows is 151 million standard cubic meters
per day (MMSCMD). The present domestic gas supply is 65 MMSCMD. The
gap must have to be met from imports, increase in domestic production
and by switching to liquid fuels.
Since 1999, the oil import bill in India has
strained the economy as the global oil prices increased sharply and
there is a renewed interest within the Indian government for
large-scale natural gas imports from the region. Cross boarder
pipelines are one of the best long-term solutions to carry natural gas
to regions with high-energy demand. While this concept is well
established in North America and Europe, it has started taking shape
and contours of a gigantic physical infrastructure are visible now.
Iranian Foreign Minister Kamal Kharrazi said that
"in principle it has been decided that Iran will supply gas to
India on its border through Pakistan via a gas pipeline."
The statement by Iranian FM during a meeting with
Prime Minister of Pakistan, Shaukat Aziz in Karachi last week was a
big thaw as far as political bearings of such projects were concerned.
THE GAS SOURCING SCENARIO
Iran has one of the largest gas deposits. It has an
estimated 940 trillion cubic feet (tcf) of proven natural gas
reserves, over 18 percent of the world gas reserves of 5300 tcf.
Slightly over half of Iran's gas reserves are offshore, and unlike
those in most other Middle East countries, 74% is in non-associated
fields. One of gas fields of Iran in Persian Gulf, South Pars field is
estimated to hold 12 tcf of gas. Iran is naturally interested in
large-scale supply of gas to the Indian sub-continent. The
geographical location of Iranian gas resources especially South Pars
field in the center of Persian Gulf makes India the best market for
country's gas export in the coming years. Iranian policy makers have
studied Pakistan and Indian markets for export of gas both in the form
of LNG and via pipeline for some time.
In the light of past several years of developments
in the region and especially, United States presence in the region,
seems to help in emergence of new route for energy supply to the South
Turkmenistan is yet another vital options for the
energy deficit countries. Its Dauletabad field is one of the largest
gas fields in the world. DeGolyer & MacNaughton, an
internationally recognized petroleum engineering firm, has thoroughly
evaluated the field's reserves. These evaluations clearly show that
the field's resources are adequate for project needs, assuming
production rates of roughly 1.5 billion cubic feet of gas per day and
15 billion cubic meters of gas per year for 30 years or more. The
Government of Turkmenistan has guaranteed deliverability of 25
trillion cubic feet (709 billion cubic meters) of natural gas
exclusively for this project.
Crescent Petroleum International, a Sharjah-based
company, got exclusive rights to export gas to Pakistan through an
offshore pipeline from Qatar to Pakistan. A memorandum of
understanding was signed between the government of Qatar and Pakistan
in 1992. Interestingly, some recent meetings indicate development are
taking place for this project. In a meeting, recently held in
Islamabad, the chief executive officer of Crescent Petroleum, which
has the agreement with Qatar to develop gas fields and exports to
Pakistan, said there was no need for more meetings over the pipeline
since the project had been delayed long enough. The company was merely
waiting for the go-ahead from Islamabad to start work on the project.
The project was to be carried out by a consortium of Brown & Root
of USA, Crescent Petroleum and Trans Canada.
The project proposed delivery of gas from Qatar's
north field having 300 trillion cubic feet of gas reserves to Gwadar.
The total length of the pipeline will be 1620 kilometers (1500
kilometers offshore and 120 kilometers onshore). The proposed capacity
of the pipeline is 2 billion cubic feet and initial throughput was
planned to be 1.6 billion cubic feet of gas per day.
GEO-POLITICAL AND ECONOMIC CONFLICTS
TURKMEN OPTION: Experts believe that Turkmenistan
could be the most viable option of a trans-border gas pipeline as it
was amongst the first proposal chosen by the multilateral donors and
Asian Development Bank whom funded a technical study to map out the
possible route passing through Afghanistan.
The future of Afghanistan is the key. Although, a
new government has lately replaced the government of Taliban in Kabul,
frequent ambush as part of ongoing guerrilla war by the ousted Taliban
keep the chances sparse to take any physical shape.
The project does not represent the first attempt to
lay a gas pipeline from Turkmenistan to Pakistan through Afghanistan.
An Argentine oil company Bridas, which won exploration rights to
Turkmen gas fields in 1992, thought of transporting gas to Pakistan
and eventually to India. The plan was stalled, however, since
Afghanistan was embroiled in a bloody civil war and the government of
Burhanuddin Rabbani in Kabul was at odds with Islamabad.
In 1994, the Taliban appeared on the Afghan
political scene by capturing Kandahar and went on to control most of
western Afghanistan. A consortium led by the US oil company Unocal and
the Saudi Arabian company Delta Oil joined the pipeline scene, winning
over the favors of Turkmenistan. Unocal and its partners eventually
withdrew from the pipeline project because of pressure from human
rights groups, especially women's rights groups, in the United States.
While much has changed in Afghanistan since the
fall of the Taliban in 2001, the state of affairs in that country
remains fragile. Lessons from the 1990s keep cautious to all involved
that a legitimate and internationally recognized state should precede
any plans to construct pipelines.
If the project proceeds as planned, and if the
Afghan state solidifies itself, the opportunities are enormous, not
only for Afghanistan itself, but also for Central and South Asia,
which can be brought together through economic connectivity and
Iran, yet another corridor of Turkmen energy resources, does not plan
to be a transit country for Central Asia gas to Pakistan and India as
was once proposed but rather to be the producer country itself.
However, Iran has successfully made political thaw for its pipeline as
it spearheaded consecutive diplomatic advances towards India and
Pakistan. Former Indian Prime Minister Atal Bihari Vajpayee's visit to
Iran on April 10, 2001 was seen as an alliance between India and Iran
in to oil, gas, and industry.
Pakistan has always been in favour of extension of
the pipeline up to India but reservations from the Indian side kept
Iranian option in cold.
President Pervez Musharraf have publicly and
privately indicated the country's willingness to give all guarantees
needed for the movement of natural gas from Iran to India via
Last month, foreign ministers of India and Pakistan
have signalled they want to go ahead with the pipeline linking Iran's
South Pars gasfield to India via southwest Pakistan. But a renewed
warning from the US to Iranian nuclear program have started shadowing
this vital option of energy for South Asia.
The gas pipeline deal that New Delhi plans to close
with Tehran last week came under the scanner at a recent meeting
between the Indian oil minister and the US ambassador to India.
Indian officials quoted by the Indian Express
newspaper said that US Ambassador David Mulford had conveyed
Washington's reservations on the energy deal during the meeting two
Though Mulford had said he appreciated New Delhi's
interest in the pipeline project, "he felt it was his duty to
highlight US concerns on Iran," the paper said.
Mulford had said that Washington was facing serious
difficulties with Iran on its nuclear weapons programme with no
immediate solution in sight to ending the impasse, the report said.
Washington's concerns were likely to be raised
again when US Secretary of State Condoleezza Rice visits India on
March 16, it added.
A US embassy official was reported as saying that
the issue had figured during Mulford's meeting with Indian Oil
Minister Mani Shankar Aiyar but said it was part of a "broad
range of energy discussions."
"It was no special policy statement on the
pipeline. (It) was a "small part of discussions," he said,
adding, however, that Washington's concerns regarding Tehran were
This warning has come ahead of the first ever
tri-partite talks between India, Pakistan and Iran on the planned gas
pipeline which are to be held in Islamabad soon, with Aiyar expected
to travel to Pakistan for the meeting.
PAKISTAN ENERGY SCENARIO
Remaining recoverable gas reserves were of Pakistan
27.0 TCF until recently which are equivalent to more than 25 years of
production at current production rates, high enough to sustain a
greater production level. Over the past 50 years, the main producing
field has been Sui in Balochistan.
The demand for gas has been growing at a rapid rate
of nearly 7 percent over the past decade to reach 800 bcf in fiscal
year 2001/2002. The largest use of gas is for power generation (35
percent), the balance being shared approximately equally 21 percent
each by fertilizer producers, other industrial applications and
households. The gas requirements of households strongly fluctuate
throughout the year. During the three to four winter months, household
demand increases considerably, which results in gas shortages. As a
result, gas supply to industrial, power and fertilizer plants is
curtailed during the heating season. Just for the power sector, the
curtailment has been estimated at about 65 bcf equivalent to 1.5
million tonnes of fuel oil, resulting in incremental costs (cost of
imports minus the cost of gas) of approximately US$200-250 million, on
account of additional fuel oil imports.
After the discoveries in the late 1990s, government
initiated ambitious investment programs, designed to increase their
delivery capacity from 1.7 million cubic feet per day (MMCFD) to 2.6
MMCFD by 2004, corresponding to an increase of nearly 50 percent, at a
cost of US$300 million. Gas sales are expected to increase by
approximately 30 percent in coming years.
ISSUES YET TO BE ADDRESSED
One of the primary needs, giving the several states
involvement, is setting up of an organization for managing and
coordinating of energy situation in Asia. That would help focusing all
the stakeholders and avoid overlapping of technical as well as
The typical common scenario for all the projects is
that all the supplying states have known potential gas and market
beyond transit states. The potential risks of the projects are what if
India finds a major gas reserves onshore or offshore. What if Pakistan
finds another major gas filed. Will it have right to sell its gas
through the same pipeline or just have to be complacent with the
royalty of $500 million dollars for right of way. Similarly, the
extent of guarantees by transit state and level of compensation if the
pipelines face closure due to potential saboteurs. And how and who
will arrange the external funding to the projects.
Although some primary feasibilities have already
been drawn by the Asian Development Bank and some other energy
companies, Pakistan, India, Turkmenistan, Qatar and Iran have yet to
carry out structuring of their respective projects and meaningful
feasibility. Due to absence of such feasibility these projects failed
to make headway in the past. The prospects for construction of a gas
pipeline from Persian Gulf to the Indian sub-continent, considering
the future gas demand in India and Pakistan and huge gas resources in
Iran is rapidly moving from dream to reality. However, the
implementation of this project requires the resolution of intricate
political and financial issues.
The significance of private sector companies and
investors in major projects has not yet been recognized in the region.
The private sector in Iran, Pakistan and India has developed rapidly
in the past ten years and is keen to participate in profitable oil and
gas projects, which has always been kept aside for the international
oil companies and the governments.
The participation of private sector in an
international consortium to export Middle East gas to Indian
sub-continent may be the beginning of a new trend in the region. Of
course these issues are not beyond the capacity of all the
stockholding states and giving the highest political commitment wills
could bind this region through the chain of pipelines and these
projects could play a permanent confidence building measure in
averting historical political disputes in the region.