It is heartening to note that Pakistan is all set to resolve its gas crisis, especially at a time when most of its leading industries are suffering financial losses due to gas shortage. One important and vital step this government has taken is to sign a deal with Iran for gas supply. The petroleum minister recently announced the completion of 781 kilometers long and 42 inch diameter pipeline by next year, at an estimated construction cost of $1.5 billion.
Pakistan and Iran signed the gas pipeline agreement in June last year, in which each participant country will be responsible for building and operating the pipeline transportation network in their respective territories. Pakistan will be receiving 0.75 bcfd gas from the pipeline to cater to its increasing demand. The pipeline will be constructed to transport gas from the Iran-Pakistan border to Pakistan off-take point near Nawabshah.
Yet, many highly effective factors have been ignored by the government of Pakistan while signing this deal, which in turn could result in a major shock for the expectations of bridging gas deficiency in the country. Industry experts believe that one of the major setbacks of this deal is that Iran would link the gas prices to oil, which would increase the prices of gas for Pakistan and the country would seemingly be getting gas on much higher prices than decided upon in the deal.
The second issue is that this deal is highly Iran-centric. This means Iran has more rights in this deal than Pakistan; being the supplier of gas, and it can scrap the deal any time in the future. This is not new for Iran, as it already scrapped $21 billion natural gas export deal with India in 2005. According to the said deal India was to import 5 million tonnes of LNG annually for 25 years from Iran starting in 2009.
Similarly in 2010, the National Iranian Oil Company (NIOC) cancelled its contract with Sharjah’s Crescent Petroleum to export natural gas to the UAE. The said 25-year contract was signed by NIOC in 1991. It is interesting to note that Crescent had developed its infrastructure in this regard.
Thirdly a very crucial factor that has been ignored in this deal is the security of this 781 kilometer long single supply line. This is a pertinent issue since both the countries will have to bear huge expenses in terms of the security of the pipeline. This should not be the single supply line.
To sum it up, Pakistan once again should review the deal and must work out the loopholes for a better and secured supply of gas from Iran. It is true that we are facing a severe gas crisis, but it is another reality that we would not be able to sustain the damage if any of the aforementioned factors is to materialise.
We must also realize that in last 3 years the gas dynamics have changed. United States have now found many gas reserves in its country and will start exporting gas in the coming two or three years. This will result in the increase of gas production in the world. Gas prices are relaxing and oil prices are getting higher, therefore, any clause in the said deal that allows Iran to link gas prices with oil is detrimental to Pakistan.
Pakistan and Iran signed the gas pipeline agreement in June last year, in which each participant country will be responsible for building and operating the pipeline transportation network in their respective territories. Pakistan will be receiving 0.75 bcfd gas from the pipeline to cater to its increasing demand. The pipeline will be constructed to transport gas from the Iran-Pakistan border to Pakistan off-take point near Nawabshah.
Yet, many highly effective factors have been ignored by the government of Pakistan while signing this deal, which in turn could result in a major shock for the expectations of bridging gas deficiency in the country. Industry experts believe that one of the major setbacks of this deal is that Iran would link the gas prices to oil, which would increase the prices of gas for Pakistan and the country would seemingly be getting gas on much higher prices than decided upon in the deal.
The second issue is that this deal is highly Iran-centric. This means Iran has more rights in this deal than Pakistan; being the supplier of gas, and it can scrap the deal any time in the future. This is not new for Iran, as it already scrapped $21 billion natural gas export deal with India in 2005. According to the said deal India was to import 5 million tonnes of LNG annually for 25 years from Iran starting in 2009.
Similarly in 2010, the National Iranian Oil Company (NIOC) cancelled its contract with Sharjah’s Crescent Petroleum to export natural gas to the UAE. The said 25-year contract was signed by NIOC in 1991. It is interesting to note that Crescent had developed its infrastructure in this regard.
Thirdly a very crucial factor that has been ignored in this deal is the security of this 781 kilometer long single supply line. This is a pertinent issue since both the countries will have to bear huge expenses in terms of the security of the pipeline. This should not be the single supply line.
To sum it up, Pakistan once again should review the deal and must work out the loopholes for a better and secured supply of gas from Iran. It is true that we are facing a severe gas crisis, but it is another reality that we would not be able to sustain the damage if any of the aforementioned factors is to materialise.
We must also realize that in last 3 years the gas dynamics have changed. United States have now found many gas reserves in its country and will start exporting gas in the coming two or three years. This will result in the increase of gas production in the world. Gas prices are relaxing and oil prices are getting higher, therefore, any clause in the said deal that allows Iran to link gas prices with oil is detrimental to Pakistan.
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