It could be a makeshift arrangement but long-term solution has to be found

Aug 08 - 14, 2005

With the acceleration of economic activity in the country, particularly in the manufacturing sector, there is an urgent need to review Pakistan's energy profile. The real point of concern for decades is that the country has remained heavily dependent on natural gas and the reserves are depleting fast, despite new discoveries. Besides, gas is no longer a cheap source of energy due to its price being linked with international prices of crude oil. The growing use of gas for power generation has also shifted the focus away from fertilizer industry, leading to growing import of urea and putting pressure on limited foreign exchange of the country.

Pakistan has always remained deficient in the production of crude oil. However, large-scale discovery of gas in the country eased the pressure to a large extent. According to some sector analysts demand for gas has already surpassed the supply in the country. The gap is expected to further widen due to acceleration of economic activities in the country, mainly due to massive growth of the manufacturing sector. This leaves no option but to import gas from other countries. There may be various options available but the key determinants are dependability, uninterrupted supply and price. The two possible modes from country of origin to Pakistan are 1) pipeline and 2) pressurized vessels, each having its own merits and demerits.

At present three pipeline projects are being considered by Pakistan, which are Turkmenistan-Afghanistan-Pakistan, 2) Qatar Pakistan and 3) Iran-Pakistan-India. The first two projects do not include India, at least for the time being but its inclusion cannot be ruled out completely. Though, Iran-Pakistan pipeline has been under consideration for nearly a decade, the real and substantial progress has been achieved only recently. The project also seems more dependable because of its over-land route.

However, the United States is the biggest opponent of this project, mainly due to its global political agenda. Both India and Pakistan deny pressure on them from the US, but confusion created during the visit of Indian Prime Minister to the US raises some doubts. As against this, Pakistan has expressed its intention to go ahead even without India.

According to some analysts the US opposition is not based on its political differences with Iran, but its keen interest in Turkmenistan-Afghanistan-Pakistan pipeline project. The two reasons for the US interest in the project are 1) getting control of the gas supply of the Central Asian countries and 2) and ownership of the pipeline. There is also a proposal to extend the pipeline to India. However, the key issue remains volatile situation in Afghanistan.

The biggest concern Indian authorities have been expressing about Iran-Pakistan-India pipeline is its security (for ensuring uninterrupted supply of gas). This concern becomes even more pronounced in case of Turkmenistan-Afghanistan-Pakistan pipelines. The security threats for Iran-Pakistan-India pipeline are not as serious as are related to Turkmenistan-Afghanistan-Pakistan pipeline. The conditions in Pakistan are far better than those prevailing in Afghanistan. A war-like situation still prevails in Afghanistan, despite presence of multinational forces in the country.

The Qatar-Pakistan pipeline has not been able to attract much attention mainly due to its under-sea route. Not only that project cost would be higher as compared to overland pipeline projects but operation and maintenance cost would also be much higher. There are efforts to extend this pipeline to India to ensure its economic viability. However, the latest agreement of India with Iran for the import of liquefied natural gas (LNG) and active negotiations on pipeline project also shows that Qatar-Pakistan pipeline may never become a reality.

Lately, Pakistan has also started contemplating import of LNG, as a last resort, to overcome the gas shortage in case none of the pipeline projects could be implemented according to its timeframe. The Indian decision to import LNG from Iran may also prompt to sign a similar agreement.

There are two important issues related to import of LNG, which are: 1) port of delivery and 2) onward transportation of gas to areas of actual use. Neither Karachi nor Port Qasim appears suitable port of delivery because of the location in close proximity with thickly populated areas. On top of this the present gas transmission and distribution network is not capable of transporting gas from these ports to upcountry. If the imported gas has to be transported through pipeline separate network has to be created even before considering LNG import.

The other option is to transport imported LNG from port of delivery to areas of actual use by pressurized vessels. This also faces two serious threats 1) movement of these vessels on the highways and through thickly populated areas and 2) huge investment required for creating unloading/loading facilities and for the purchase of pressurized vessels. The cost of transportation would be much higher when compared to transmission through pipeline.

Import of gas may help in meeting the deficit but the country has to work harder to enhance local production of gas, find and develop alternate energy sources. Pakistan is endowed with water, coal, wind, solar modes of power generation. If it could stop using gas for power generation, the proven reserves can last for another half a century. Why waste time?