IRAN GAS VITAL FOR PAKISTAN'S ECONOMY
TARIQ AHMED SAEEDI (email@example.com)
Jan 11 - 17, 2010
To ensure consistent supply of gas at high responsive tariffs, Pakistan has two options in front; intensify exploration of indigenous energy resources and import gas from across the border. Lapsing on drilling targets is common and the targets set for the year often are missed on the different grounds ranging from security risks near or at the oil and gas fields and financial constraints.
Exploration and production of indigenous resources require huge investments in infrastructure around the sparsely located oil and gas fields. Additionally, this would not be enough to meet the growing energy demands in the country. Even if indigenous gas reserves can meet the demand, Pakistan needs an immediate boost in medium term and the solution lies in the early activation of commercially viable gas imports in the country, said an energy expert. Import of gas is cost effective since investment would be on construction of pipeline and not on the refining of crude for instance, he added. The gas supplies shortfall in Pakistan may be ratcheted up to 2.7 billion cubic feet per day in 2015, 5.8 bcfd in 2020, and 10.3 bcfd in 2025, according to a research report of PricewaterhouseCoopers.
To drive economic growth and create job opportunities, energy supplies should be increased. Already, Pakistan has lowest per capita energy consumption of 14 million British thermal units as compared to 92 million BTUs for Malaysia and 34 million BTUs for China, according to the medium term development framework 2005-10. Import of gas endorsed for its cost effectiveness by many local and international energy experts can ensure adequate supplies of energy in Pakistan for years to come at reasonable cost.
Government of Pakistan is also pondering over this option due to exorbitant costs involved in exploration and operationalization of indigenous gas wells. Pakistan can import natural gas that informs the main component in the energy mix of the country form Iran, Turkmenistan, and Qatar-three global energy giants with variable geographical proximities with Pakistan. It is worth noting that Pakistan's current energy mix includes 30 percent oil, 50 percent natural gas, 6.5 percent coal, 12.7 percent hydro, and 0.8 percent nuclear. Gas continues to be the leading source of energy in 2010 and onwards up to 2030, albeit its share would likely to be reduced slightly, a government document noted.
For energy experts Iran is a right choice for importing natural gas in to the country. Iran has the world's second largest estimated reserves of 26.6 trillion cubic meters, and exports gas to Armenia and Turkey. Iran gas pipeline project can provide cheapest and suitable fuel for power generation of 4000 megawatt in Pakistan. Even if Pakistan imports gas from Turkmenistan that has gas reserves of 2.83 trillion cubic metres the country can be beneficial since proposed construction of pipelines in Turkmenistan-Afghanistan-Pakistan-India has a total covered area of 1,680 kilometers, much below the proposed 2700 kilometer pipelines from Iran right down to India. However, geography is not the only factor that will determine the viability of any of these projects, but other reasons also make one project more workable over another. Under the proposed TAPI project, gas is to be supplied from the Dauletabad and adjacent gas fields in Turkmenistan through Herat, Kandahar in Afghanistan across Pakistan border near Chaman, Zhob, DG Khan, Multan, and onwards to Fazilka near Pak-India border. This project has remained on the paper while Iran gas project is moving gradually in to the implementation stage.
Reportedly, Iran has already constructed almost 80 percent of the 900 km 56-inch diameter pipeline from Assaluyeh refining and processing facility to Iranshehr the capital of its Sistan/Baluchistan province. The refining facility on Persian Gulf receives supply from Iran's offshore South Pars field, having around 40 % of Iran's total proven natural gas reserves and 8% of the world's reserves and a nominated gas supply source for the IPI project. The pipeline has the capacity to carry 3.2 bcfd of gas, out of which 2.1 bcfd is meant for exports.
On Pakistan's side, the construction of pipelines is yet to be started. It might be the cost of construction of the pipeline, which is estimated at $1.25 billion that slowed the pace of implementation of the project. Since government envisaged the construction on public-private financing, financial burden is likely to be halved. But, there are some other bottlenecks in the project. First, general sales purchase agreement (GSPA Conditions Precedents) has not been completed so far. Last month, ministry of petroleum officials visited Iran and met with Iranian counterparts for this purpose, however resolution was not diagnosed on the issues in heads of agreement, a key framework document incorporating key principles of GSPA.
It was earlier reported that Iran would charge 80 percent of crude oil price for gas supply. Utilities Global Survey 2009 by PWC said fuel cost and tariff setting was the major challenge of companies in Asia in 2009. In 2005, India and Iran did not reach the agreement because of the very issue of tariffs. Iran quoted $4 per million btu to which India was disagreed. Second, Iran has to defy the international pressures to export its gas from the Pakistan's corridor. U.S. foreign policy has been hard in relation with Iran. U.S. would never want Iran to emerge as economic power on the back of oil and gas revenues. According to energy experts, the Iran-Pakistan-India (IPI) is important for Iran to ingratiate itself with the international gas market and break its political reticence.
The physical construction of 800 km 42 inch diameter from the border traversing along the Makran Coastal Highway to connect to gas transmission network at Nawabshah are to be completed by Inter State Gas Systems (Pvt) Ltd, a joint venture of SSGC & SNGPL. The construction is slated to be completed in four-year with first inflows expected by the end of 2013. The project envisages to import 750 million cubic feet daily of natural gas from Iran.
Iran-Pakistan-India is not a project of this century, but it was conceived back in 1993. With in and out of India in the project several times since then, the recent progress indicates that once gas pipeline is completed in Pakistan India would be ready to join. India is also short of other choices than to connect to overland pipeline traversing Pakistan from Iran. India' consumption would rise to 34 billion cubic meters in 2010. Recently, Iranian top official expressed his confidence over the India's partnership in the tripartite project. Obviously, India has a profitable large consumer market for Iran's gas and this would give a cost of production and supply benefits to Iran.
Pakistan is like a peanut in the midst of energy hungry countries like India, China, and U.S but a natural beneficiary of geographic location. Total supply from Iran to Pakistan and India was estimated at 200 million standard cubic meters of gas daily.
Iran-Pakistan agreement was signed between presidents of Iran and Pakistan on the sidelines of tripartite summit on Afghanistan security in May 2009 in Tehran. The project (Iran-Pakistan) was revived in December 2003.
Gas shortfall in Pakistan is undermining the industrial growth and aggravating electricity crisis. Average electricity shortfall in winter was estimated at 1400 megawatt, but demand from agriculture increased the demand-supply gap to 2400 megawatt this season. Supply from Iran is not only vital for energy security in Pakistan, but it would trigger the economic growth in Sindh and Balochistan by creating employment opportunities.