ECC approved sharing 2.1 billion cubic feet Iranian gas per day equally between Pakistan and India in the Phase-I of the IPI project.

SHAMIM AHMED RIZVI, Bureau Chief, Islamabad
Apr 23 - 29, 2007

After the meeting of Economic Coordination Committee (ECC) of the Cabinet in Islamabad last week, Secretary Ministry of Petroleum and Natural Resources Ahmed Waqar told newsmen that Iranian gas would start flowing into Pakistan by 2012.

The ECC meeting, which was presided over by Prime Minister Shaukat Aziz, cleared several issues related to Iran-Pakistan-India (IPI) gas pipeline project and approved linking price formula with that of Japan crude cocktail. Mr. Waqar, along with Dr. Ashfaq Ahmed, Advisor to Finance Ministry, was briefing newsmen about the decisions taken at the meeting. He said the transit fee, which Pakistan would get from Iran for the gas supplied to India, would be decided in accordance with the best practices in the world. He said India would formally confirm the acceptance of gas-pricing formula after reaching an understanding on the transportation cost and the transit fee for the pipeline traversing Pakistan.

Waqar said the ECC also approved sharing Iranian gas of 2.1 billion cubic feet per day equally between Pakistan and India in the Phase I of the IPI project. In the Phase-II of the project, 5.3 billion cubic feet gas per day would be imported, out of which India would purchase 3.2 bcfd gas and Pakistan 2.1 bcfd.

"The meeting also approved the IPI project that would be materialized on segmented approach". Under the segmented approach, Tehran would lay the pipeline from Paras gas field to Pak-Iran border and Islamabad would lay pipeline from Iranian to Indian border. The gas would be imported from the Paras gas field in Iran, which has 944 trillion cubic feet gas reserves - the second biggest gas field after Russia's gas field. The Paras gas reserves are enough for next 50 years if 40 bcfd gas is utilized," he added.

Waqar said under the segmented approach Tehran has started laying pipeline from Paras field to Pakistan border, as Iran also wants to provide gas to the population in its part near Pakistan border. He said since the route of pipeline is yet to be decided between Iranian and Indian border, so the cost of pipeline structure in the territory of Pakistan will be decided thereafter. However, he said the cost of laying pipeline within the territory of Pakistan has been estimated in the range of $ 3 billion. Pakistan is to carry out the techno-economic feasibility of the project structure to be laid down in its territory and to this effect an international consultant would be appointed, he added.

Continuing, Mr. Waqar said two routes of the pipeline are under consideration under which it would be having two lengths - 7500 km and 1050 km. However, the exact length of pipeline would also be decided after the route gets finalized. He said the length and the cost of steel would actually decide the exact price of the pipeline portion to be laid down by Pakistan. To a question, he added, in case India for any reason does not join the project, Iran and Pakistan would bilaterally materialize the project.

Waqar said the ECC also approved the steering committee to review the project. The committee will be headed by Minister of Petroleum and Natural Resources, comprising Advisor to Prime Minister on Finance and Revenue, Advisor to Prime Minister on Energy, Deputy Chairman Planning Commission, Chairman CBR, Secretary Finance and Secretary Petroleum and Natural Resources.

He said the issues including transportation cost; transit fee; joint declaration; inter-governmental agreement; gas sales & purchase agreement; project structure; appointment of a project coordinator and the project feasibility study would be solved by June next and the ECC would also accord approval to transit fee and transportation cost after working out in consultation with India. In case India, for any reason, does not join the project, Iran and Pakistan would bilaterally materialize the project. To a question, the official said India would formally confirm the acceptance of gas-pricing formula after reaching an understanding on the transportation cost and the transit fee for the pipeline traversing Pakistan.

To a question, he said that Iran for the first time in March 2006 had offered to Pakistan and India the price of gas of $ 9.3 per MMBtu and then it revised downward to $ 7.2 per MMBtu at Pak-Iran border. Responding to Iranian offer, Pakistan came up with the price of $ 3.25 per MMBtu and India came up with $ 4.25 per MMBtu including transportation and transit fee. After the three countries failed to develop the consensus on the gas-pricing formula, the three states appointed an independent consultant M/s Gaffiney Cline and Associates of Singapore to work out the gas price. The said independent consultant managed a gas-pricing formula based on the price of Japan crude cocktail, which is being widely used and quoted index in the region. Pakistan and Iran have accepted the formula. However, in the bilateral meeting of Pakistan and India, New Delhi also indicated that it would accept the formula, but after working out the gas transportation and transit fee, Mr. Waqar added.

Dr. Ashfaq Hassan told newsmen that in view of its shortage and price escalation, the ECC has decided to increase support price for gram from Rs 750 to Rs 850 per 40 kilogram. As the gram crop this year is also expected to be good, the decision would help stabilize the prices of the commodity. PASSCO was asked to procure 200,000 tones of grams from farmers at the international price to serve as buffer against price escalation.

The meeting was informed that the country was expected to have a bumper crop of wheat this year. According to estimates, the production would stand at 23 million tones against the target of 22.5 million tones. The country has already 800,000 metric tones of stocks and the ECC fixed procurement target of five million tones for provincial food departments and PASSCO.

The ECC noted that the sugar situation was satisfactory with the availability of over 2.4 million tones of stocks. Sugarcane production this year was estimated at 51.4 million tones as against 44 million tones last year. The meeting noted with satisfaction that the ratio of locally produced and imported edible oil has reached 50 as against 44 percent indigenous production in 2001-02. The government is pursuing a policy of reducing dependence on imported palm oil.

It was informed that the cement price was also satisfactory at Rs 238 per bag as against Rs 353 per bag last year. The country is also expected to export 2 million tones of cement this year because of increase in production capacity. Dr. Ashfaq Hassan said the CBR collected taxes of over 594 billion rupees in the first nine months of the current financial year as against the target of 579.8 billion rupees fixed for the period. The growth in tax collect ion this year was 213 percent as against last year.