Pakistan and Iran agree to build pipeline without India

May 1, 2006
Pakistan and Iran agree to build pipeline without India
By Fida Hussain

ISLAMABAD: Pakistan and Iran have agreed to build a bilateral gas pipeline if India does not join the project to bring cheap Iranian gas to South Asia, officials said on Sunday at the conclusion of three days of technical talks.

Petroleum Secretary Ahmad Waqar, who headed the Pakistani side at the talks, told a press conference here that Pakistan and Iran had reached an agreement on basic principles of a gas pricing formula and decided to work on a bilateral Iran-Pakistan pipeline regardless of India’s involvement in the project.

Iran’s Deputy Oil Minister Mohammad Hadi Nejad Hosseinian, who headed an eight-member Iranian team at the talks, said he did not expect United Nations sanctions due to its nuclear programme to affect the gas pipeline to Pakistan and India or the country’s oil and gas sector.

“Oil prices are very high. Sanctions against Iran extending to its energy sector will push oil prices further up in the international market. The world cannot afford such a hike in oil prices,” Hosseinian said at the press conference after the two sides signed a joint statement at the conclusion of the seventh meeting of the Pakistan-Iran Joint Working Group.

Waqar also played down the threat of sanctions against Iran. “Pakistan is viewing this project keeping in view its national interests. We need energy to sustain economic growth,” he added.

Waqar said that a “broad-based agreement” had been reached on pricing. However, Pakistan and Iran will continue to examine each other’s proposals on pricing, he said, adding that Iran would provide a Gas Sales Purchase Agreement (GSPA) to Pakistan in a week and “we will reciprocate as early as possible”. Both sides agreed to a project structure wherein gas would be delivered at the Iran-Pakistan border under a supply agreement. Waqar said that the pipeline will run through the Bhong area in Rahim Yar Khan district.

He said they also agreed to enhance off-take volume from 2.1 billion cubic feet per day (bcfd) to 2.8 bcfd in case the project was implemented bilaterally. The two sides also agreed to develop a joint declaration, signifying the commitment of the governments to the project, for signing in a ministerial meeting in June in Tehran. According to a written statement distributed at the press conference, the JWG examined financial, commercial, technical and legal aspects of the project. Major issues discussed included gas pricing, project structure, project feasibility, gas off-take volumes and the GSPA.

The next JWG meeting will be held in Islamabad on May 25, while petroleum ministers from both countries will meet in Tehran in June. Waqar said that the construction cost for Pakistan is likely to be $2-2.5 billion. He said that the president and prime minister envisioned Pakistan becoming an energy corridor for China.

He said it was also possible to lay two parallel pipelines to meet India and Pakistan’s energy requirements “Things still have to be sorted out at bilateral level,” he said. Hosseinian said that Iran had reserved enough gas for the IPI pipeline to meet both Pakistan and India’s energy needs. If there were a gas shortage, Iran could reserve gas in other fields, he added.