IP pipeline project: Pakistan to pay $6/MMBTU more for gas price

ABDUL RASHEED AZAD

ISLAMABAD: The gas price under the Iran-Pakistan (IP) pipeline project is now being offered at $11 per million British thermal units (MMBTUs) - $6 per MMBTU more than what was offered in 2007.

The $1.2 billion IP project has been lingering since 1995, when Iran-Pakistan signed a memorandum of understating (MoU) to lay the pipeline.

The Iran-Pakistan Working Group was formed in 2003 to move the project ahead. Pakistan told Iran that in case India was unwilling to join, Iran-Pakistan gas pipeline would be pursued as an independent project; but in 2005, another MoU was signed which included India.

In 2007, India and Pakistan provisionally agreed to pay Iran US$5 per MMBTU. However, India subsequently withdrew over price and security concerns.

Under the accord, signed in June 2010, Iran will provide about 750 million cubic feet per day (MMCFD) of gas to Pakistan for 25 years. The deal can be extended by five years and volumes may rise to 30 million cubic meters a day.

On March 16, 2010 in Ankara (Turkey) the Iranian President Mahmoud Ahmadinejad and Pakistan’s President Asif Ali Zardari signed the Inter-Governmental Framework Declaration. According to the Gas Sale and Purchase Agreement, Pakistan would import natural gas with a provision to increase it to one billion cubic feet (BCFD) per day.

Currently, Pakistan is facing serious gas shortage and is managing demand-supply situation through gas load-management plan according to which gas supply for industries and CNG sector remains suspend for three days a week in Punjab, one day a week in Sindh.

To effectively deal with the looming energy crisis Pakistan desperately needs to complete one of the three available options, according to officials: (i) IP, (ii) import of Liquefied Natural Gas (LNG) from Qatar; and (iii) through Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline project. The gas price under IP project would be $11 per Million British Thermal Unit (MMBTU), for TAPI $13 per MMBTU and Liquefied Natural Gas (LNG) at $18 per MMBTU.