IRAN-PAKISTAN GAS PIPELINE
Research Analyst, PAGE
May 17 - 23, 2010
The Iran-Pakistan gas pipeline, also known as the IP pipeline project, is a proposed pipeline to deliver natural gas from Iran to Pakistan.
The 2,775-kilometre (1,724 mi) pipeline will supply gas from the South Pars field in Iran. The pipeline will start from Asalouyeh and stretch over 1,100 kilometres (680 mi) through Iran. In Pakistan, it will pass through Balochistan and Sindh. The main pipeline will continue towards Multan.
The initial capacity of the pipeline will be 22 billion cubic metre (bcm) of natural gas per year, which is expected to be raised later to 55 bcm. The pipeline will have a diameter of 48 inches (1,200 mm). The estimated cost of the project is US$7.5 billion.
For both Iran and Pakistan, the pipeline project would be highly beneficial. Iran sees in the pipeline not only an economic lifeline at a time when the United States and its European allies are trying to weaken the gas-rich country economically, but also an opportunity to penetrate in the huge gas market of India with over one billion population.
Pakistan, for its part, views the pipeline as the solution to its energy security challenge. Pakistan's domestic gas production is falling and its import dependence is growing by leaps and bounds. By connecting itself with the world's second-largest gas reserve, Pakistan would secure reliable gas supply for decades to come. If the pipeline is to be extended to India it could also be instrumental for the stability in often tense Pakistan-India relations as well as a source of revenue for Islamabad through transit fees.
The project was conceived by a young civil engineer in mid 1950s in the Military College of Engineering, Risalpur. Formal discussions were started between the governments of Iran and Pakistan in 1994. A preliminary agreement was signed in 1995 between Pakistan and Iran. This agreement foresaw construction of a pipeline from South Pars gas field to Karachi. Later Iran made a proposal to extend the pipeline from Pakistan in to India. In February 1999, a preliminary agreement between Iran and India was signed.
In February 2007, India and Pakistan agreed to pay Iran US$4.93 per million British thermal units but some details relating to price adjustment remained open to further negotiation.
In April 2008 Iran expressed interest in the People's Republic of China's participation in the project.
In 2009, India withdrew from the project over pricing and security issues, and it signed a civilian nuclear deal with the United States in 2008. In March 2010 India called on Pakistan and Iran for trilateral talks in May 2010 in Tehran.
In January 2010, the United States asked Pakistan to abandon the pipeline project. Reportedly, in return US offered Pakistan assistance for the construction of a liquefied natural gas terminal and import of electricity from Tajikistan through Afghanistan's Wakhan Corridor. On 16 March 2010 in Ankara-Turkey, Iran and Pakistan signed a sales-purchase agreement. On April 12, 2010, Iran announced that it had completed construction of 1,000 kilometers of the pipeline of the total 1,100 kilometers on Iranian soil.
In March this year, Pakistan has signed a $7.5 billion deal with oil-rich Iran paving the way for laying the much-delayed natural gas pipeline.
The 900-kilometre pipeline is expected to mitigate the crippling energy crisis in Pakistan which has seriously hit the countryís industry.
The Inter-State Gas Systems, a semi-autonomous body that will take care of Pakistan's interests in the import of gas through the pipeline, and the National Iranian Oil Company signed the heads of agreement and an operational accord.
Under the heads of agreement, Pakistan will have the right to charge transit fee for gas transported to India.
No Doubt, the signing of the pacts is an historic achievement and a milestone towards meeting the energy needs of Pakistan.
The pipeline is being built between Asalooyeh in southern Iran and Iranshahr near the border with Pakistan and will carry the gas from Iran's South Pars field. The pact also addresses the issue of transportation tariff, which will be worked out in line with international practices.
India has not participated in talks on the venture since 2008. Pakistan and Iran declared last year that they would go ahead with the project bilaterally if India maintained its stance of not joining the venture.
The United States has urged Pakistan to reconsider its deal with Iran for building a multibillion dollar pipeline. The US advised Pakistan to seek other alternatives because of Iran's dispute with the international community over its nuclear programme. The US opposed large investments in any Iranian project.
For the Obama administration, the signing of the pipeline deal is a diplomatic setback which could undermine its policy of weakening Iran economically. Unlike the Bush administration, which vocally opposed the project, the Obama team chose to remain mute, either in order to facilitate rapprochement with Tehran or due to its reluctance to burden US-Pakistan relations.
Pakistan's need for energy is mounting rapidly with each passing day. The country has been facing severe energy crisis since last two years. A land base gas pipeline to fulfill energy needs is many times cheaper than other available sources to import energy in Pakistan. The IP Pipeline will be economically and socially beneficial in the long term.