IRAN GAS VITAL FOR RESUSCITATING PAK ECONOMY
Oct 24 - 30, 2011
Pakistan has requested Tehran to increase the volume of gas exports from the current agreed amount of 21.5 million cubic meters per day to 30 mcm/d in view of its growing energy demand and declining production of gas from its own resources.
According to the informed sources, Iran sees no problem in exporting more gas to Pakistan when the much talked about Iran-Pakistan gas pipeline project goes into operation.
It may be recalled that in June 2009, Tehran and Islamabad had signed a 25-year agreement based on which Iran has given consent to export 7.8 billion cubic meters of natural gas to Pakistan per annum through pipeline. According to the agreement, the pumping of gas will start from February 2014.
However, at the moment the new round of negotiations between the two countries over the subject of increasing the volume of gas exports to Pakistan is underway in Tehran and the next round of the two countries' negotiations are expected in Islamabad soon.
It is interesting to note that apart from the agreed schedule of exporting natural gas through pipeline in 2014, well informed sources said, Iran would be ready to start exporting gas to Pakistan from 2012 as the construction of the gas pipeline in Iran's territory will be finished early next year.
Though it is generally believed in Pakistan that India is no more a part of the Iran gas pipeline project as India is reportedly succumb to the US pressure against the gas pipeline project, yet Iran has not omitted India from negotiations on the gas pipeline project, while China is also demanding to import Iran's gas.
It may be noted that Iran ranks second in natural gas resources after Russia with available gas reserves estimated at over 33 trillion cubic meters and this dependable energy source has the capacity to address the burning issue of energy deficit in Pakistan. Today, Pakistan produces around 4000 cubic feet of natural gas per day, over 70 percent from Sindh.
It is said that the gas imported from Iran would be much cheaper from what it costs in Pakistan which means that completion of this much needed gas pipeline project would be a tremendous substitute to the costly import of oil (diesel and furnace oil) being used for power generation. It is estimated that the bill for oil import is feared to exceed from $15 billion at the end of the current financial year 2012.
The root cause of almost all economic ills in Pakistan is the chronic energy deficit, which is primarily responsible for price inflation and low GDP growth, which consequently is weakening the rupee against international currencies. The Iran gas pipeline project is delayed for over a decade when its total cost was not more than $2.5 billion but today the continuous delays have pushed up at estimated $8 billion.
The entire nation has to experience the torturous agony of over 12 hours power load shedding and two to three days rationing of gas supply in Punjab which has caused paralyzing effects on a large number of industrial units. It is the energy deficit and inflated price of energy, which compelled a large number of industrialists through out the country to relocate their units in Bangladesh, Vietnam and other countries. This flight of capital is bound to add to the miseries of the people in general by increasing rate of unemployment. The flight of capital should be taken seriously for the government and its policymakers.
It was the international pressure on import of gas from Iran or oil from Central Asia that kept people of Pakistan deprived of economic growth and prosperity. Those who are against the pipeline project never come forward to address the energy issues faced by the people in Pakistan with the exception of a few cosmetic solutions.
Now is the time when the government of the day should withstand the decision of importing gas from Iran as early as possible before it is too late as the vulnerable energy sector has come to a stage where it demands for an emergency plan to meet the energy needs of the country.
Pakistan is confronted with a number of issues including current account deficit and trade account deficit primarily due to costly import of oil. The country is incurring significant loss of revenue due to illegal export of petroleum products to Afghanistan.
In order to plug the leakages, the government has recently banned export of locally refined petroleum products to Afghanistan. However, the oil supplies to Nato forces continue unabatedly.
The significant move to ban export of petroleum products to Afghanistan is aimed at discouraging tax evasion by limiting options for oil players to dump export-oriented products in Pakistan. Furthermore, it should also help in improving availability of petroleum products in the local market.
Currently, almost all products are in deficit in the view of limited refining capacity in the country. The unresolved issue of circular debt is also affecting the performance of the refineries, as they have to import crude on cash payments but not getting payments from end consumers. Consequently, the refineries have also reduced import volume and some of the refineries have threatened to suspend supplies unless their held up payments were not cleared. Under this situation, the illegal trade of petroleum products was criminal on the part of whosoever was involved in this business.
Sources said that commercial exporters on one hand were engaged in exporting petroleum products to Afghanistan through informal channels thus evading taxes and revenues to the government while on the other, the country was facing shortfall in energy products as the refineries were also reluctant to import crude due to circular debt creating acute financial constraints especially for smaller refineries. It is learnt that due to the decision, exporting companies earlier relying on locally refined products for exports will have to source products from elsewhere.