 India and Pakistan face serious energy problems but purchasing gas from Iran does not offer an easy option after all.The Iranian Foreign Minister Manouchehr Mottaki, on a visit to India recently, held talks with Indian officials on the stalled tri-nation gas pipeline project. It remains to be seen whether India will continue to blow hot and cold over joining the pipeline or will do away with the US pressure on the project. India has been stating the law and order situation in the province of Balochistan, one area from where the pipeline is supposed to pass through, as reason for its continued dithering on the matter.
However Iran, Pakistan and many observers widely believe that Indian foot-dragging on the project is mainly due to US pressure specially, after the Indo-US nuclear deal. On the other hand, some recent incidents have also put pressure on the future of the pipeline, especially the recent attacks and killing of officers of the Iranian Revolutionary Guards.
Iran accused Jundullah a terrorist group said to be based in Pakistan, for this and many other attacks in Iran. The Iranian interior minister visited Pakistan soon after the attack and asked for handing over of Abdul Malik Reggi, the leader of the Jundullah group, who Iran said was hiding in Pakistan.
The attack has created fear about the future of the pipeline, though Pakistan has denied sheltering the group and handed over the brother of Abdul Malik Reggi to Iran. Jundullah is believed to have been formed by the US and currently its activists are said to be acting in cahoots with British and US intelligence to further their activities.
Iran and Pakistan have made quite a lot of progress over the project. Earlier called Iran-Pakistan-India gas pipeline, the project has now become IP (Iran-Pakistan) pipeline with India virtually out of the project, though the Indians are still not coming up with a clear statement.
On May 24, 2009, Pakistan President Asif Ali Zardari and his Iranian counterpart Dr Mahmoud Ahmadinejad signed an inter-governmental framework declaration to support a gas pipeline agreement between the oil ministries of Pakistan and Iran. A gas sale-purchase agreement was signed by the managing directors of the National Iranian Oil Company and the Inter-State Gas System (ISGS) under which Iran will provide 750 million cubic feet of gas a day to Pakistan over the next 25 years.
The ISGS is a semi-autonomous body which looks after Pakistan's interests in international projects. The deal, called ‘Peace Pipeline' by Iran's oil ministry, was signed on the sidelines of a tripartite summit of Pakistan, Afghanistan and Iran on eliminating terrorism, drugs and human trafficking.
The project, originally called the Iran-Pakistan-India (IPI) gas pipeline, was conceived in 1995. India virtually quit the project in 2008. Iran and Pakistan initiated a Gas Sales Purchase Agreement earlier this year. On June 6, 2009 Pakistan and Iran formally signed an agreement to activate the bilateral gas pipeline project.
According to the project proposal, the pipeline will begin from Iran's Assalouyeh Energy Zone in the south and stretch over 1,100 km through Iran. In Pakistan, it will pass through Balochistan and Sindh but officials now say the route may be changed if China too joins the project. The gas will be supplied from the South Pars field. The initial capacity of the pipeline will be 22 billion cubic meters of natural gas per annum, which is expected to be later raised to 55 billion cubic meter. It is expected to cost $7.4 billion. The pipeline project would be completed by 2013. Pakistan will receive 750 cubic million feet gas on a daily basis, which will generate 4000 megawatts of electricity. Recently when President Zardari visited China, Pakistani Foreign Minister Shah Mahmood Qureshi said ‘'The IPI project can become the IPC (Iran-Pakistan-China) project or even if it is the IP (Iran-Pakistan) project, China can invest in it.''
The gas pipeline could feed energy-deficient areas in China bordering Pakistan. Even as India, which has stayed away from the past few trilateral meetings, gears up to resume talks on the gas pipeline, Pakistan is actively pursuing China to join the $7.4 billion project In 2005 Iran has said it was looking forward to extending the Iran-Pakistan-India gas pipeline to the world's most populous country, China.
According to Fars news agency, Mehdi Mir-Moezzi, managing director of the National Iranian Oil Company (NIOC), told the monthly Iran ‘Offshore' that exports to China will create another huge market for Iranian gas, stressing that feasibility studies on the project will have to be launched before a concrete decision is made. Recently China has also expressed the desire to join the project. The pipeline plan is, however, threatened by Washington's serious reservations about Iran's nuclear ambitions.
The US is dissuading India and Pakistan from going ahead with the project and is willing to address their long-term energy needs if both countries forget about the gas coming from Iran . According to the US Iran-Libya Sanctions Act, the American President may impose sanctions on any international firm that does $20 million or more in oil or gas business with Iran (and $40 million with Libya). But in keeping in view long-term needs and interests, India either has to join the project or side with US under pressure.
The need for natural gas is now more imperative than ever both for India and Pakistan. Long-term projections indicate that the demand for gas in India is likely to go up from the present 74 to about 500 million cubic meters per day by 2025, necessitating large-scale gas imports. Similarly, gas supply in Pakistan, currently at 71 million cubic meters per day, is expected to increase by 50% in the next five years.
The longer-term outlook would justify significant imports of gas by Pakistan as well. The pipeline coming from Iran would be 2,670 km long with a 48 inch diameter and hold $3.2 billion of gas. Pakistan could earn as much as $500 million in royalties from transit fee and save $200 million by purchasing cheaper gas from this pipeline project.
The pipeline project would be completed by 2013. Pakistan will receive 750 cubic million gas on a daily basis, which will generate 4000 megawatts of electricity.
The gas pipeline would be "a win-win proposition for India and Pakistan" that could serve as a durable confidence-building measure, creating strong economic links and business partnerships among neighbouring countries. Besides the project will also improve the infrastructure in the concerned countries, which is considered vital for development.
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