Natural gas is an important source of energy, both in India and Pakistan, along with petroleum and coal. It contributes around 15 per cent of the consumption of commercial energy sector in South Asia, with India and Pakistan holds less than one per cent of the world’s gas reserves.
Gas demand in India and Pakistan is expected to increase steadily, particularly in the power sector and as a means of reducing expensive oil imports. This could be satisfied by significant increases in gas production, imports or both. However, a major constraint in the continued use of gas in these two neighbouring countries is the inadequate domestic gas infrastructure.
The use of natural gas, a much cleaner fuel, in India and Pakistan has been slower than anticipated owing to lack of the necessary infrastructures and the concomitant investment requirements. It is self-evident that India-Pakistan would experience ever increasing energy demands as they lack the resources and the capital to meet this demand. The high use of biomass fuels is not only depleting natural resources, but also causing serious envision mental and health concerns. The poor quality of the energy infrastructure and electricity deficiency in India and Pakistan is a biggest obstacle to the economic development in these countries.
Statistics suggests that the present installed electricity generation capacity (13,000mw) of Pakistan must increase to 54,000mw by the year 2018. Pakistan suffers an economic loss of approximately one billion dollars annually owing to shortfalls in electricity.
Similarly, experts estimate that about 120,000mw must be added to India’s capacity over the next 25 years to enable it to meet the projected growth of 10 per cent in demand for electricity. At present power shortages are costing India 2 per cent of its national income.
The profile of primary commercial energy consumption (percentage wise) of these two neighbouring countries is presented in the following table.
Being the world’s largest coal producer, India is highly dependent on coal and oil, but the use of gas has been rising faster in the recent years. Gas demand is expected to grow further due to increased use in the power sector. Natural gas is India’s fastest growing fuel source. While India’s domestic production is unable to meet its requirements, the gap between the demand supplies is widening day by day.
India has about 19 trillion cubic feet (TCF) of gas reserves at present and consumes approximately 26 billion cubic meters (BCM) of natural gas annually, not enough to meet the mammoth economic needs, and is running at a gap of 6-8 BCM between demand and supply. According to a conservative estimate, India will need 37 BCM by 2005, rising it to 51 BCM by 2010, and 145 BCM by 2025. Should the gas supplies be easily available, the natural gas demand in India could be as high as 77 BCM by 2010.
On the other hand, Pakistan is also highly dependent on oil and gas, and is a net oil importer. Natural gas accounted for 38 per cent of Pakistan’s energy consumption, all of which was produced locally. Pakistan has 21.6 TCF of proven gas reserves currently. According to rough estimates Pakistan’s natural gas demand is projected to increase by 50 per cent by 2006. Pakistan’s natural gas resources are being rapidly depleted with a projected shortfall of 1.6 billion cubic feet per day. This shortfall is expected to double in the following decade as the government has declared natural gas as the most preferred fuel for power generation.
It shows that both India and Pakistan are comforted with the problem of gas supply shortfalls. Fortunately, both the countries have the advantage of bordering two major natural gas rich regions — the Persian Gulf and Central Asia. Their western neighbours Iran and Turkmenistan possess massive recoverable reserves of natural gas in the world. It is this geographical proximity that can provide the basis for mutually beneficial co-operation between India and Pakistan.
Luckily, South Asia lies in the vicinity of countries with rich natural gas. Given the economic attraction of pipeline transportation of gas, this becomes the most preferred means for the import of natural gas into the region from the neighbouring countries. However, the pipeline to be established for this purpose would require transit through more than one nation and in order to achieve economies of scale, sharing of gas supplies among the countries becomes essential. Therefore, a coordinated effort to meet the challenges and exploit the potential in the energy sector in the region is direly required.
Both Iran, holding 812 TCF of proven gas reserves and Turkmenistan, possessing 101 TCF of gas reserves are keen to supply gas to India and Pakistan and for that matter the gas diplomacy has been in the offing for almost a decade. Over the last five years, Pakistan has approved Iranian and Turkmenistan’s proposals for gas supplies to India via Pakistan, hoping that economic interdependence might help reduce bilateral tensions between the nuclear-armed neighbours.
Pakistan has shown keen interest and cooperation in this project and has assured its commitment to provide all sort of physical security to the pipeline project. But India has been resisting of becoming economically dependent on Pakistan. Undue mistrust persists in the mind of Indian ruling elite has put economic consideration on the back burner. Consequently, gas pipeline project has not been able to get Indian favour as yet.
In spite of India’s serious energy needs to enhance its industrial infrastructure, domestic politics in India are complicating the picture, otherwise the import of gas by India — by an overland pipeline through Pakistan — makes perfect economic sense.
Contrary to this economically feasible in-transit Pakistan route, India is exploring the construction of a gas pipeline from Russia across Central Asia and China or to have an on-shore pipeline from Iran or Qatar to avoid energy dependence on Pakistan despite the mounting energy needs in India. But the feasibility of these projects is highly doubtful for economic, technical, environmental, and security reasons. The proposed Russia-India pipeline would extend over an extremely long stretch of extremely varied terrain and may cost anywhere up to $15 billion to build, or slightly less if connected through already operating pipelines.
In view of lack of interest by India for a joint gas pipeline Pakistan, too, is looking for options of importing gas for his exclusive use from Qatar, Iran and Turkmenistan. But Pakistan’s weak financial position might make it difficult to secure financing for such ambitious project.
From a cost perspective a single natural gas pipeline extending overland from Pakistan to India would be comparatively cheaper than constructing two or more independent pipelines. The Indian leadership would have to realize that the mutual interdependence ensuing from construction of gas pipelines either from Central Asia or Iran to India through Pakistan is likely to create a conducive atmosphere and enable both the countries to peacefully manage, if not totally resolve their traditional problems. Further, their long-term trade interest in Central Asia would not be possible without the cooperation of Pakistan.
As far as the interest and need of common and poor people of both these countries are concerned India and Pakistan should strengthen their long-term energy relationship, but any finality about the proposal for a gas pipeline between the two countries may take time — not because of want of interest by Pakistan, but because of unnecessary fears of Indian leadership.
Politics have inhibited energy trade between India and Pakistan, despite the countries’ complementary needs. Once increased trade takes hold, it could bolster stability.
