Iran and Pakistan Complete $7.6 Billion Gas Pipeline Agreement in Turkey

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Researched by Industrial Info Resources (Sugar Land, Texas)--Iran and Pakistan have signed a $7.6 billion agreement in Turkey that will enable the launch of a gas pipeline venture to transport Iranian natural gas to Pakistan. Initiated in the 1990s, the project originally intended to supply gas to the Indian subcontinent. India, however, withdrew from the agreement process last year.

The 900-kilometer pipeline will span the Balochistan and Sind provinces and will run from Asalouyeh in southern Iran to Iranshahr, near the Pakistan border. The gas feed will come from the Southern Pars gas field in Iran.

The two countries signed an operational agreement and a heads of agreement (HOA), paving the way for finalizing the gas sales purchase agreement. The HOA pertains to the supply of gas to India, in case the country chooses to be involved in the venture at a later date. According to the HOA, Pakistan is entitled to a transit fee in exchange for safe transit of gas across its territory to the Indian border. Documentation and site survey activities are likely to begin shortly.

Under the agreement, Iran will deliver about 750 million cubic feet of gas per day for 25 years, starting in 2015. Pakistan is currently facing an energy deficit and is able to generate only 80% of its power requirements. Gas from the venture will enable the country to generate up to 4,000 megawatts of power.

Meanwhile, the Indian government has called for tripartite talks in May of this year to address a spate of concerns, including the safe transit of gas to the Indian border. India had offered to pay for the gas only on delivery, while Iran required that India pay for the supply, even if the delivery was hindered on Pakistan territory.

While each country has agreed to construct the length of pipeline traversing its territory, India hopes to participate in the construction of the 1,035-kilometer pipeline in Pakistan to ensure that the construction process is transparent, reliable and economical.

Other areas of contention include turbulent political conditions in the Baluchistan province, which is a stronghold of militant Islamic groups, as frequent changes in the gas prices being quoted by Iran. India will incur an expense of $1.10 to $1.20 per million Btu for transportation and transit fees. While the domestic gas prices in India have been in the range of $5.70 per million Btu, the country probably will be importing gas at double this price.

India may also propose an alternate pipeline route along the Pakistani coastline to transport gas into the country.

While India has not participated in the negotiations since last year, China has expressed interest in the venture. Pakistan is in dire need of gas to operate its power ventures, but India has initiated quite a few nuclear power projects to meet its energy requirements. It remains to be seen if India's concerns will be addressed at the talks in May.

For related item, see February 18, 2010, article - India and Turkmenistan Discuss Undersea Alternatives to Pipeline from Iran's South Pars Gas Field.

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