ISLAMABAD, April 10: The Economic Coordination Committee (ECC) of the cabinet on Tuesday approved gas-sharing with India and the gas-pricing mechanism at the Iran-Pakistan border under the $7.4 billion Iran-Pakistan-India (IPI) gas pipeline project.

Prime Minister Shaukat Aziz presided over the meeting which also constituted a committee to oversee the project implementation, including feasibility studies, inter-governmental agreements, framework agreement and other related discussions on the pipeline.

The committee, headed by minister for petroleum and natural resources, would comprise prime minister’s advisers on finance and energy, Planning Commission deputy chairman, Central Board of Revenue chairman and secretaries of finance and petroleum.

Briefing the media after the meeting, Economic Adviser to the Finance Ministry Dr Ashfaq Hassan Khan said it was an “energy-dominated meeting” but later sidestepped questions on other energy-related items on the agenda, such as a proposal to award a multi-million dollar project to the Associated Group of Iqbal Z. Ahmed to import liquefied natural gas and difficulty independent power producers (IPPs) are facing in getting foreign exchange.On the issue of making foreign exchange available under the implementation agreements, Dr Ashfaq said this was very minor thing.

An official told Dawn that gas at the Pakistan border had been indexed with Japan customs cleared crude (JCC). In practical terms, this gas will be priced much higher than the locally produced gas which is also indexed with international oil prices. Currently, the average gas production price in Pakistan is $2.6 MMBTU.

The Iranian gas under the approved formula will translate into $3.67 per MMBTU when the JCC price is $40 per barrel of oil -- a rate least expected given current international prices. The gas price will be $4.3 per MMBTU at $50 per barrel and $4.93 per MMBTU at $60 per barrel.

The gas rate at the Pakistan border will rise to $5.56 per MMBTU when crude prices reach $70 per barrel. The tariff will further rise to $6.56 per MMBTU and $7.06 in case oil prices increase to $80 and $90 per barrel, respectively.

Petroleum Secretary Ahmad Waqar told reporters that the ECC approved gas-sharing arrangement with India under the IPI project. Under the first phase, Iran will deliver about 2.1 billion cubic feet of gas per day (BCFD) at the Pakistan border which will be equally shared by both India and Pakistan.

Under the second phase, another 3.2 BCFD of gas will be transported by Iran. This will take total supplies to 5.3 BCFD. Of the total, Pakistan and India will get 2.1 BCFD and 3.2 BCFD, respectively.

The secretary said the construction of the project was expected to start some time next month and it would be completed in three-four years. If things proceeded according to the plan, the pipeline would start delivering gas in 2012, he said.

Mr Ahmad said the ECC also approved the gas-pricing mechanism but it would not be prudent to disclose exact rates given the fact that the governments of Iran and India had yet to approve it as agreed at the joint working group level. He said that such a price would be in the national interest of Pakistan because it would need to be seen in the context of competing fuels like oil and LNG which were on the higher side.

On project structure, he said that the three parties had also approved that the project should be constructed on segmented basis, which meant that the three countries would lay gas pipeline within their respective territories. Iran has already started laying the pipeline from the South Pars gas field to the Pakistan border, of which some gas would be utilised in eastern provinces of Iran.

He said route for the pipeline had not been finalised yet and future discussions among the parties would be focused on this subject.