ISLAMABAD, April 30: Pakistan and Iran on Sunday reached broad agreement on various financial and technical aspects of laying a Pakistan-specific bilateral gas pipeline with 33 per cent higher supplies to Islamabad, clearly indicating that India could not become part of it due to capacity constraints.
They, however, said a second parallel pipeline would be required for a trilateral project if India decided to join it that would further improve economics of the trans-national pipeline to the benefit of the three countries.
“It is a breakthrough”, Petroleum Secretary Ahmad Waqar told Dawn after the three-day talks with an Iranian oil ministry delegation. Tehran has agreed to enhance gas supplies to Islamabad through the Iran-Pakistan pipeline from the originally envisaged 2.1 BCFD (billion cubic feet per day) to 2.8 BCFD. “About 700 mmcfd of additional gas means a lot for Pakistan’s growing energy needs,” he said.
Asked where did India fit in the project having a total capacity of 3.2 BCFD of gas when Pakistan alone would be supplied 2.8 BCFD and another 400 mmcfd (million cubic feet per day) would utilised by Iran in its eastern provinces, the head of Iranian delegation said the three sides would discuss the possibility of a second pipeline to meet energy requirements of the two countries, including India.
For the first time, the two sides clearly used the term Iran-Pakistan (IP) for the project instead of IPI (Iran-Pakistan-India) when they jointly “decided to work on bilateral IP gas pipeline regardless of the outcome of the trilateral IPI project”.
“Both sides (also) agreed to make immediate efforts for concluding bilateral arrangements”, they said and added that it was resolved that the contracts and agreements for the project would be developed and finalised expeditiously.
At a joint news conference on the conclusion of the joint working group (JWG) talks, both the countries seemed defiant to the US opposition to the project although Islamabad was non-committal in its response to possible UN sanctions against Iran.
Islamabad is certain to implement the project because its needs energy for economic growth. “So we have decided to implement the project bilaterally,” said Mr Waqar, who led the Pakistani side to the JWG.
Asked about the prospects of the project in the light of Foreign Secretary Riaz Khan’s statement in Washington that Pakistan would honour any sanctions imposed on Iran, Mr Waqar said the two sides agreed on technical aspects of the pipeline and he could not comment on political issues.
Iranian Deputy Oil Minister Dr Hadi Nejad Hosseinian, however, said he did not believe the United Nations would impose sanctions against Iran because such a move would increase oil prices.
“Any action like that will increase oil prices very high and I believe that the UN or its bodies will not put any sanctions on oil or the oil industry,” he said. He said the world could not afford to put sanctions on these sectors as it will substantially increase oil prices. Iran is the second largest oil producer with a production of about four million barrels per day.
Mr Waqar said the two sides broadly agreed to the principles of gas price mechanism for the pipeline. Iran proposed a gas price formula and Pakistan presented its formula and the two sides agreed to examine each others’ position to reach an agreement during the bilateral JWG meeting in Islamabad on May 25. This JWG would be followed by a trilateral JWG meeting in Islamabad also involving India.
The two sides also agreed on a joint declaration to be signed by oil ministers of Pakistan and Iran in June in Tehran. They also broadly agreed on the project structure under which Iran would deliver gas to Pakistan at a border point to be disclosed later after working out details. However, the termination point of bilateral pipeline in Pakistan would be Bhong, near Rahimyar Khan. The gas pipeline segment from Pak-Iran border to Bhong would cost about $2.5 billion, Mr Waqar said.
Mr Waqar said the two sides agreed to finalise a gas sales and purchase agreement (GSPA) at the earliest. The Iranian side promised to send the draft GSPA within a week to Pakistan, which would be responded to before the next meeting of JWG on May 25.
The two sides also agreed to start a detailed feasibility study of the project. Iran will provide technical data for the study. It was also agreed that the petroleum ministers of both the countries would meet in Tehran in June 2006, on dates to be finalised later, to sign joint declaration for the project.
In response to a question about total reserves of South Pars field for supplies to India and Pakistan, Mr Hosseinian said Iran possessed about 500 TCF of gas.
A part of this would be dedicated to the Iran-Pakistan pipeline and in case India joined, Iran may divert reserves from North Pars gas field as well.