ISLAMABAD: Pakistan will renegotiate a price agreement with Iran for the 750 million cubic feet per day (MMCFD) of natural gas it planned to import by December 2014 under a $3.6 billion pipeline deal. The talks will be held on the basis of the lower gas price parameters ‘finalised’ with Turkmenistan.
“We will definitely renegotiate gas price with Iran. The (gas sales and purchase) agreement with Iran provides for price renegotiation before the commencement of gas flows,” Petroleum Minister Dr Asim Hussain told journalists on Sunday, a day before Turkmen President Gurbanguly Berdimuhamedow arrives in Islamabad on a two-day visit.
The minister claimed that on the basis of pricing formula already decided, the Turkmen gas would be 10 per cent cheaper than the Iranian gas. The Iranian price, he said, would have to be brought down and “we expect to secure from Iran and the one we have already finalised with Turkmenistan a cumulative saving of about $100 billion over a period of 25 years with the two projects”.
The minister said that Pakistan and Turkmenistan would “initial” the gas sales and purchase agreement (GSPA) during the Turkmen President’s visit. He said the formal signing of the agreement would take some time because the transit fee for the pipeline in Afghanistan was not yet clear.
“Turkmenistan claims the transit fee (in Afghanistan) would be lower but we think it would be higher, so we have to take into account the transit fee risk factor before signing the formal agreement,” he added.
He claimed that the financing for the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline project would not be a problem although the cost of the Pakistan segment was not yet clear because the project partners had not started the process for appointing a financial adviser for the structure.
Responding to a question, Dr Asim said a lot of progress had been achieved on the Iran-Pakistan pipeline project. “The survey for the project route is complete and its design engineering report is expected within 15 days. We hope to hold tendering for the pipeline and other long-lead items within this month.”
GAS SHORTFALL: The minister attributed the current serious gas shortfall to a constitutional discrepancy arising out of the 18th Amendment that required the use of gas from new discoveries in the province where it was made and the failure of successive governments to develop and utilise huge reserves in tight, shale and low-heating value gas resources. These two factors “have led us to a crisis situation now”.
He expressed the hope that with these measures the serious shortfall would come under control next year and there would be no gas shortage in 2013 and the country would be back to “business as usual”.
He said the shale and tight gas had cumulative reserves of about 76 trillion cubic feet of gas – almost three times the proven reserves of conventional gas reserves. Of this about 500MMCFD of shale gas would come into the system in two years while the first 20 MMCFD of tight gas from Kirthar range would be online soon.
In the meanwhile, about 200 MMCFD of additional quantities are expected to come into the system, including 100 MMCFD in December from Kunar-Pasakhi Deep, and 30 MMCFD each from Sui, Qadirpur and Kandanwari.
The minister said the gas shortfall against committed supplies would be around 529 MMCFD during this month, going up to 911 MMCFD in December and peaking at 1127 and 1460 MMCFD in January and February, respectively, before easing down to 726 MMCFD in March.
He said under the gas loadshedding plan finalised with consensus at a meeting with stakeholders, supplies to CNG and industrial sector would remain closed for three days a week on an alternate basis.
He said that certain consumer sectors were running a campaign but it had to be kept in mind that the industrial sector had contracts only for nine months and all industries and their labour irrespective of their location belonged to Pakistan.
Therefore, the industrial gas disruption would be only for three days a week even in the Punjab.
The power sector would get a maximum of 76 MMCFD supplies during this period while fertiliser industry would get 90 MMCFD against its requirement of 236 MMCFD, for which they have to prepare a plan for mutual sharing. He said the gas supply was short of demand and hence it had to be shared equitably and all would need to be patient.
NO PROGRESS ON EXPLORATION: Responding to a question, the minister said that no new licence for fresh exploration and development could be awarded over the last two to three years which would have a bad effect on future energy situation. He attributed this to a constitutional discrepancy following the 18th Amendment and poor incentives in the 2008 petroleum policy which did not attract exploration and production companies.
“Instead of looking back, we have to move forward,” he said, adding that it was now clear that the lease of the licence area was a provincial responsibility while the administration and management of hydrocarbon resource belonged to the centre. He said the petroleum policy 2011 awaited the cabinet approval, while a shale gas policy would be submitted to the economic coordination committee of the cabinet in a couple of days.
INFRASTRUCTURE CESS: The minister regretted that gas development surcharge introduced about four decades ago for development of gas infrastructure had been transferred to provinces under the National Finance Commission, which the provincial governments had started using as a regular budgetary source instead of developing infrastructure.
Therefore, the government was now imposing infrastructure cess on gas consumption in commercial, industrial and fertiliser sectors to specifically use it for laying major pipelines across the country.
In an obvious reference to a leading LPG group, the minister said the LPG mafia had caused a lot of damage to the country for the sake of benefits by blocking production of gas and associated hydrocarbons through litigation.
“Whatever they get now will be based purely on merit and not through patronage and bribes,” he said, adding that a lot of powerful people were beneficiaries of the group.
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