August 22, 2008
IPI gas pipeline project hits snags
Pakistani daily The News reported that USD 7.2 billion Iran-Pakistan-India gas pipeline project has hit snags as Iran is insisting that the price of gas should be reviewed after every 5 years, while Pakistan is opposing it, arguing that gas prices under the agreed pricing formula are already linked to the fluctuations in the Japan crude cocktail prices.
A senior Pakistani government official at the ministry of petroleum and natural resources said that “Our experts’ team is scheduled to leave for Iran on September 23rd 2007 to remove this bottleneck.” He added that now our delegation is going to Tehran and the authorities in Iran have also invited Indian experts to discuss this thorny issue.
The official said that Pakistan would not succumb to the Iranian demand. If Indian experts do not turn up, then Pakistan would fight its case alone. In case positive development occurs following technical talks to be held in Tehran, then Islamabad would send another delegation to Tehran in the next month to sign gas sales & purchase agreement.
The official said that all the 3 stakeholders have agreed to the gas pricing formula based on the Japan crude cocktail price. The economic coordination committee has already approved the said formula on April 10th 2007 under which if the price of Japan crude cocktail stands at USD 60 per barrel in the region, then the price of Iranian gas would stand at USD 4.93 million British thermal units. And if the Japan crude cocktail price stands at USD 70 per barrel, the gas price would be at USD 5.56 per million British thermal units.
He explained if the Japan crude cocktail price surges in the market up to USD 90 per barrel and USD 100 per barrel, the gas price at Pakistan Iran border would be at USD 6.56 per million British thermal units and USD 7.06 per million British thermal units, respectively. He said that if the Japan crude cocktail price in the region stays at USD 10, USD 20, USD 30, USD 40 and USD 50 per barrel, the gas price would be of USD 2.04, USD 2.54, USD 3.04, USD 3.67 and USD 4.30 per million British thermal units at the Pakistan Iran border.
The official said that in case the gas sales & purchase agreement was signed, then in the first phase, 2.1 billion cubic feet Iranian gas would be imported that will be equally shared between Pakistan and Iran. The project would be undertaken on segmented approach. In case India, for any reason, does not join the project, Iran and Pakistan would bilaterally materialize the project. The official said under the Phase-II, 5.3 billion cubic feet gas per day would be imported, out of which India would purchase 3.2 billion cubic feet per day gas and Pakistan 2.1 billion cubic feet per day. He added that “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. The Paras gas reserves are enough for the next 50 years if the gas of 40 billion cubic feet per day is utilized.”
Under segmented approach, Tehran has started laying pipeline from Paras field to the Pakistan border, as Iran also wants to provide gas to its population living near the Pakistan border. He said that since the route of the pipeline was yet to be decided between the Iranian and Indian border, the cost of the pipeline structure in the territory of Pakistan was yet to be determined. However, he said the cost of laying the pipeline within the territory of Pakistan had been estimated in the range of USD 3 billion. He said that 2 routes of the pipeline were under consideration.
