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In this Monday, March 11, 2013 file photo, Iranian welders work on a pipeline to transfer natural gas from Iran to Pakistan, in Chabahar, near the Pakistani border, southeastern Iran. – AP Photo
In this Monday, March 11, 2013 file photo, Iranian welders work on a pipeline to transfer natural gas from Iran to Pakistan, in Chabahar, near the Pakistani border, southeastern Iran. – AP Photo
In this Monday, March 11, 2013 photo, then Iranian President Mahmoud Ahmadinejad, left, prays with Pakistan's then President Asif Ali Zardari after inaugurating the Pakistan-Iran gas pipeline in Chabahar, near the Pakistani border, southeastern Iran. – AP Photo
In this Monday, March 11, 2013 photo, then Iranian President Mahmoud Ahmadinejad, left, prays with Pakistan's then President Asif Ali Zardari after inaugurating the Pakistan-Iran gas pipeline in Chabahar, near the Pakistani border, southeastern Iran. – AP Photo

ISLAMABAD: Pakistan's plan to import natural gas by pipeline from neighboring Iran would be an economic ''death sentence'' for the country because the gas price is too high, a Pakistani advocacy group said in a report released Wednesday.

Despite US pressure, the Pakistani government struck a deal with Iran to import gas in the hope of relieving the country's energy crisis, especially the shortage of electricity.

Gas is used to fire many of Pakistan's power plants, but insufficient quantities mean rolling blackouts are common.

The Islamabad-based Sustainable Development Policy Institute (SDPI) said in its report that the contract with Iran means the gas sold to Pakistan likely will be several times more expensive than the domestic gas currently used.

“This is a death sentence for Pakistan's economy,” the report said. It criticised Pakistani officials who “blatantly ignored the energy dynamics and its pricing while going for this deal.”

An official at the Ministry of Petroleum and Natural Resources rejected the report, saying the pipeline project was good for Pakistan. He spoke on condition of anonymity because he was not authorised to talk to journalists.

The advocacy group's findings represent the latest challenge to the plan. There are also serious doubts about how Pakistan could finance the at least $1.5 billion needed to construct the pipeline and whether it could go through with the project without facing US sanctions in place over Iran's nuclear program.

“This gas will be an economic disaster for us,” said the lead author of the report, Arshad Abbasi, at its release in Islamabad.

The chief guest was Shamsul Mulk, an ex-chairman of Pakistan's water and power authority and former head of the advocacy group's board of governors. Many other former senior officials and academics are affiliated with the institute.

The report called on the Pakistani government to renegotiate its contract with Iran and uncouple the price of gas with the cost of oil. That could produce lower gas prices that are closer to Pakistan's domestic cost of gas.

The agreement with Iran stipulates that Pakistan must construct its side of the pipeline by December 2014. If the country fails to meet this deadline, it will be liable to pay fines that could run into the millions of dollars per day.

The Iranian government says it has built 900 kilometers (560 miles) of the pipeline on its side of the border, with about 320 kilometers (200 miles) remaining to be built inside Iran. The Pakistan segment of the pipeline is expected to be about 780 kilometers (500 miles) and has not yet been constructed.

The US has opposed the project, instead promoting an alternative pipeline that runs from the gas fields of Turkmenistan to Afghanistan, Pakistan and then to India. The US also has championed a number of electricity generation projects within Pakistan, such as helping renovate hydropower dams.

The advocacy group also championed the use of hydropower, which is much cheaper than gas but can require significant up-front costs.


Comments (40) Closed



salman Wazir Oct 23, 2013 09:28pm

We being a nation are fooled since long. Our policies within and without are marked by bizarreness....

Bismillah Khan Oct 23, 2013 10:23pm

Any numbers to back up this claim?

Zubair Asghar Oct 23, 2013 10:55pm

Is it possible to attain and/or read this report?

Israr_Ahmed Oct 23, 2013 11:06pm

I know Asif Zardari did this deal because of his sect and not because of his country. This is a volatile region, a 10 year old child can picture the issues related to security of this pipeline. Whatever Gas installations we have, we cannot even secure those, let alone, promising to build a 7k pipe. What kind of a deal was it? Thing is, the people of PAK are dumb. cant ever vote the right people.

Asif Oct 23, 2013 11:06pm

Finally they have started making excuses to back out from the agreement. Sorry Pakistan you need aid not trade.

Red Dawn Oct 23, 2013 11:44pm

Dawn: People read your paper to read complete facts. Not fragments of information. The cost of iran gas is pegged to price of petrol at 0.78 parity. Whereas gas fro Turmanistan is pegged at 0.7 of petrol price parity (But it excludes the transit costs that afghanistan will charge). At present the conversion at this rate int BTU british thermal unit would have been a relevent information in this report.

mba Oct 23, 2013 11:41pm

We are talking about millions of Dollars. Just by the way, does one of Dawn-Readers knows who earned how much (millions of Dollars) in this deal? I am asking this (stupid) question just for curosity and would not use the information against anyone - I promise. An afterthought: when are we going to invest seriously a couple of millions in solar energy. Please be careful about the right generation of solar cells in this case. China - the major producer of solar cells - has a lot of old stuff in store. Just don

DK Oct 23, 2013 11:56pm

How informative ! :) Without giving any details of domestic production costs and landed price of imported gas much of discussion is meaningless. What will be the price of power generated by this imported gas and will there be buyers of electricity at those prices are key question. Sadly article doesn't answer much and is a bit confusing :(

Sadiq Oct 24, 2013 12:28am

What is the contract price for the gas supply? Is it comparable that current supply price from the domestic sources?

AbbasToronto Oct 24, 2013 12:33am

The price of resumption of US Aid to Pakistan was cancelling the Iran Gas deal by any means possible.

DiplomatOne Oct 24, 2013 12:39am

Economic death sentence, but for whom ? There won't be any nation left if the energy crisis is not resolved. The condition will only get worse, as the meagre resources left are depleted. People need to eat, in order to live.

Shabbir Lakhani Oct 24, 2013 12:50am

So the sovereign Govt Of Pakistan is running the country or its policies are dictated by "others" . Further agreements and signing of documents is preceded by feasibility and economic studies so whats the real reason. Is this the price Pak has to pay to get loans and aid from other vested groups. Its high time the interest of the masses and the country becomes primary otherwise this minus -justice and wisdom- has already shattered the dignity and structure of the country

Ahmer Oct 24, 2013 01:07am

This pipeline was never meant to be economically viable. It was a political statement made by President Zardari in support of an isolated Iran out of sectarian considerations.

ali Oct 24, 2013 02:28am

Zardari and his dumb advisers made another big bo bo , they knew that they would not be around by the time that the project is completed and the next government will have to worry about it, so they signed everything that favors Iran>They have fooled the people of Pakistan by telling them that they have done a good by signing this gas deal with Iran.

SaeedS Oct 24, 2013 02:44am

Pakistan government crying and screaming for many years about kalabagh dam . But some smart people of Pakistan are the biggest hurdle for dam. Now some more smart people again causing hurdle for this project. Please all the smart people use there effort to control population of Pakistan which is the main and only problem of the Country.

Zubia Oct 24, 2013 02:39am

Would it be prudent to ask who funded this report and the research on which it is based? Is it possible SDPI is acting on behalf of US interests? While the US looks bad opposing the pipeline on basis of their enmity with Iran, an academic report deflects the attention away from them to more powerful, if cooked up argument, while achieving precisely what they want...no pipelines for Iranian oil and to hell with Pakistan's interests.

Shah Oct 24, 2013 03:56am

I am a Petroleum Engineer working in the Canadian West Coast province of Alberta. My work is particularly concentrated on gas wells and I can tell you that it doesn't take a rocket scientist to figure out that importing gas from Iran will indeed be an economic death sentence for Pakistan. Just the transportation costs alone are enormous not to mention the unpredictable changes in weather can cause a sharp rise/decline in inventories which will directly effect the price. Pakistan has one of the largest coal reserves in the world to meet their energy demands. There are also recent reports of tight and/or shale gas reserves in Balochistan. The U.S. is using this technology and is expected to be energy independent by the next 50-100 years. Why doesn't Pakistan use technology to unearth it's natural resources which will create thousands of local jobs to stimulate the economy.

bangash Oct 24, 2013 04:23am

Its become an ego issue now for Pakistan and moving on its own inertia. Few decisions in the country are based on rationalism or national interest.

unbelievable Oct 24, 2013 04:20am

Why should this be a surprise to anyone? No business person in his right mind would enter a multi Billion deal without doing an economic analysis/feasibility study - but once again Pakistan makes an emotional decision not knowing how much the pipeline would cost, where it would specifically go, who would build it, how to defend it, how to finance it - or what the fully loaded delivered cost of the gas would be.

zafars Oct 24, 2013 06:52am

Sustainable Development Policy Institute ? sounds very much like a west funded organization.

Syed Oct 24, 2013 07:05am

This is very serious matter, government should clarify the purchase price of Gas.It is speculated that electricity produced from gas will cost Rs 18/- per unit. Will it not be better to produce electricity from furnace oil and save itself from sanctions.

Viv Oct 24, 2013 08:16am

Report co-authored in Saudi !

Faisal Qureshi Oct 24, 2013 11:55am

I word Kick Back is very common for all Pakistan Governing apparatus

Abbas Ali Oct 24, 2013 12:24pm

It will still be cheaper than the current furnace oil option right? or is it even expensive than that too?

Imran Oct 24, 2013 12:45pm

where were they when this project was getting signed??!!...it looks like an effort to sabotage this project by creating confusion among people through this bogus report.

Faisal Awan Oct 24, 2013 12:51pm

Totally False Report The Gas price charged by Iran is much lower than Imported Oil used for electricity production. Further, under the agreement with Iran, the gas price will not be higher than the TAPI gas Price (Turkmenistan, Afghanistan, Pakistan and India gas pipeline). USA funded organization are spreading False propaganda against Iran Pakistan Pipeline.

Irfan Baloch Oct 24, 2013 07:12pm

Interesting to know what are the bases of the report, who funded and supported this report and how authentic it is and why it seems to favour all those countries that are against this project

Azhar Ahmad Oct 25, 2013 02:19am

@Shah: Because all our good petroleum engineers are working overseas

Omar Oct 25, 2013 04:44am

@SaeedS Best comment ever.

Shahpur Oct 25, 2013 05:12am

It does not look like Pakistan want Iranian Gas, weather it is cheap or expensive. There are already enough problems. Iran and Pakistan do not need another problem. Why bother with this gas business, an explosive business. Let Pakistan figure out how to find the right type of gas, and Iranian can keep their gas, under ground, a natural storage. Whatever has been done is good enough for the memories, lot of photos and handshakes. Looks like it is a bad business. deal.

pathanoo Oct 25, 2013 05:52am

The Iranian Gas Pipe Line is a "Pipe Dream." I am concerned about the penalty clause the author says could be millions dollars per day if Pakistan does not build it's part of the pipe line in time by December, 2014. I have no way to know whether the price of Iranian Gas is high or reasonable.

Mika Oct 25, 2013 07:43am

People here accusing west for their problems. stop begging dollars from west and in your beloved country. all of you try to leave Pakistan and live in west at any cost. double face

Mirza Oct 25, 2013 11:55am

TAPI: Pakistan is integrated into the Indian trading block, giving India access to Central Asia. IP: Pakistan joins the Central Asian/Middle Eastern trading block.

Priority should be given to IP so that looking ahead, we maintain and define the future of our own unique culture. TAPI can be and should be considered a secondary prospect.

Saad Oct 25, 2013 02:40pm

@Shah: I am not engineer, therefore cant challenge your assertions. Rather ask you that can i use your argument of transportation cost and weather change effect for TAPI gas pipeline project? if yes then TAPI gas pipeline project is equally not feasible and it also carriers additional security related risk like passage through Afghanistan. Secondly, by your argument premises can any pipeline project be feasible?

muhammad Oct 25, 2013 04:16pm

No doubt hydropower (Dams) are the cheapest source of energy but when country is divided on it than what options we are left with either we buy costly oil or use gas whose continuous supply is ensured as it will be supplied through pipeline whole europe is being supplied gas by Russia through pipeline

Raj Patel Oct 25, 2013 09:48pm

My suggestion- Pakistan can built a gas powerstation near the border of Iran with the amount they want to spend on building pipe line and transmitt power from there. So they dont have to spend lots of money on pipe line. Thus they can escape from penalty and utilize gas for power generation.

gary Oct 25, 2013 11:42pm

@Mirza:

May we all know what is your unique culture? What is so great about your culture? If the news coming from your part of the world is an indication, you people have no culture at all.

MAH Oct 26, 2013 11:34am

What is missing here is the alternates of not doing this. Would that be a smaller disaster?

Zubair Khan Oct 26, 2013 04:40pm

But where were all these experts when the plans were made? Probably negotiations can show some way out.

Shankar Oct 26, 2013 09:15pm

This is biased. How can you compare imported price of gas to that of domestic production? You pay for the energy value of Iranian gas, not for the cost of production. As long as the price is less than the international price for gas, Pakistan should go ahead. Ask yourself if Saudi Arabia will sell you crude oil at 10$ per barrel which could still be more than their cost of production. I see a sectarian bias in this report. Gas is just gas whether it is from a Sunni or Shia country!