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The Iran–Pakistan–India gas pipeline

The Iran–Pakistan–India gas pipeline

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Published by ASHFAQ REHMANI
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Published by: ASHFAQ REHMANI on Jan 26, 2010
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05/11/2014

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Pakistan oil and gas industry
is going through a process of transition asIT is experiencing a new wave of privatization. Government of Pakistan has announced itsintention of privatizing 37% of its 75% stake in Qadirpur gas field and also transferringmanagement responsibility to private companies. Aware of rich oil and gas reserves, oil andgas industry of Pakistan is putting in steady efforts to make best utilization of resources and build a strong production base. Petroleum Policy of oil and gas industry in Pakistan isdesigned with a focus on promoting private sector investment in oil and gas sector. Instanceof gas and condensate discovery by Oil and Gas Development Company Limited (OGDCL) inExploratory Pakhro Well No. 01 is a major achievement of this sector. Austria's OMV iscredited with discovery of gas in Taijal 1 exploration well. OMV has also pointed outmedium-term growth potential in Pakistan's reserves.Reports of oil and gas industry of Pakistan reveals this country’s current average daily oil production is about 3,800 net barrels and natural gas of 73 net million cubic feet. Despite suchhuge potential, Petroleum Ministry of Pakistan reported high trade deficit due to major gap between import and export value. Oil import of Pakistan is expected to reach $6.5 billion in2009 and government aims at formulating policies to reduce import dependence and promoteself-reliance by triggering exploitation.BP, one of world's largest energy companies entered Pakistan oil and gas industry byacquiring all of Oxy's remaining reserve in Pakistan of approximately 68 billion cubic feet of natural gas and 3 million barrels of oil. Iran has also consented to sign gas supply deal withPakistan oil and gas industry and it will work to construct proposed Iran-Pakistan-India gas pipeline although India has not expressed its decision on this regard.POGEE or Pakistan Oil, Gas & Energy Exhibition & Conference to be held between 18th and21st May, 2009 will discuss several imperative issues concerning oil and gas industry atPakistan including increasing demand for 
products and services
in this sector. Thisis an important event for Pakistan oil and gas industry as leaders of this sector get a decentscope of displaying
latest technology
pertaining to energy industry. Focal point of thisconference will be to highlight contemporary developments in Pakistan’s oil and gas sector 
The
Iran–Pakistan–India gas pipeline
The
Iran–Pakistan–India gas pipeline
, also known as the
IPI pipeline
or the
Peacepipeline
, is a proposed 2,775-kilometre (1,724 mi) pipeline to deliver natural gas from Iran toPakistan and India. In April 2008 Iran expressed interest in the People's Republic of China's participation in the project. The project is expected to greatly benefit India and Pakistan,which do not have sufficient natural gas to meet their rapidly increasing domestic demand for energy. India is predicted to require 146 billion cubic meters (bcm) of gas per annum by 2025,up from 33 bcm per annum in 2005.In September 2009, the Mehr news agency reported a Pakistani diplomat as saying "Indiadefinitely quitted the IPI (India-Pakistan-Iran) gas pipeline deal, in favor of Indo-US civiliannuclear agreement for energy security. Iranian officials however said India is yet to make an
 
official declaration.
A Natural Gas Pipeline that will connect these three critical nations.
Iran, Pakistan, and India, collectively known as the IPI, are very close to finalizing the ‘PeacePipeline’ plan that would drop a critical natural gas supply line that would run through thethree neighboring countries. As always, there is a catch (or several) – and India is weary of signing on because of the Price Revision Clause being imposed by Iran that would base the price of the natural gas on a formula that utilizes Japan’s gas market as a benchmark. Nevertheless, India’s participation in the ‘Peace Pipeline’ doesn’t seem to matter as much toIran and Pakistan as they continue bilateral talks that suggest India’s role as merely an added bonus that would sweeten the deal. Pakistan’s ambassador to Iran, Shafkat Saeed, insists thatif India rejects the terms of the deal, the oil will be routed through China instead.Though India has assured that it will take part in the TAPI (Turkmenistan-Afghanistan-Pakistan-India) gas pipeline – it is clear that the TAPI pipeline is not a replacement for theIran-Pakistan-India pipeline, and their lack of an absolute decision in light of U.S. pressure is proof that the IPI pipeline stands to bring benefit to the Indian economy.
U.S. Threatens Sanctions on Pakistan if they seal the deal with Iran – Who Cares?
Check out this Business Week editorial from June of 2005 that demonstrates the UnitedStates’ declining ability to ‘demand’ U.S.-friendly international policies. The U.S. perhapsusing scare tactics, has mentioned that investment sanctions are a possibility for India andPakistan should they join hands with Iran on this business deal – But who’s economies are atstake on a local level? There was a time when the U.S. could influence just about any nationto favor U.S. interests – either by the diplomatic efforts of our 20th century leadership or  brute force.
Russia doesn’t care.
“Russia’s Gazprom has established a branch office in Islamabad to participate in IPI project(Press TV Iran, Oct. 2007)” Furthermore, Russia’s president Vladimir Putin issued astatement last week to confirm that he will continue to cooperate with Iran on their nuclear  program, identified as a deadly threat by the United States.
China doesn’t care.
Chinese officials continue to insist that sanctions are not the solution and will only complicatethe situation – and as a permanent U.N. Security Council member they have rejected any andall U.S. involvement in Iran.
And of course…Iran doesn’t care.
Mr. ‘what me worry?’ himself, President Ahmadinejad, is not worried about U.S. sanctions.As a matter of fact a senior Iranian military commander has warned that the IranianRevolutionary Guard will carry out suicide bombings throughout the Persian Gulf if “necessary.”
The Iran-Pakistan-India (IPI) gas pipeline, once ratified, will be a building block towardspeace and stability in South Asia, and would enhance the magnitude of trade betweenthe three countries. But the pipeline is yet to see an agreement on prices: the pricesproposed by Iran are more than double of what Pakistan and India are willing to accept.India wants to pay a fixed amount per unit delivered to its border, but Iran wants thecost to be linked to the fluctuating international energy prices, saying the prices offeredby Pakistan and India is half of what it is looking for.
 
Also the instability in Balochistan and barrier politics played by America are majorhindrances coming in the way of the project. Trilateral talks are underway, and all threecountries are sanguine about the prospects of agreement.With a total length of 2,775 km and an estimated cost of $7 billion (2006) the pipeline isbound to change the face of regional politics in South Asia. The much talked about “pipeline of peace” brings with it multi-faceted implications for gas hungry Pakistan andIndia, and also for Iran, home to world’s second largest natural gas reserve.Pakistan and India are facing acute natural gas shortage due to the rising energydemand in both countries. In 1995 Pakistan and Iran signed a preliminary agreement forthe construction of a natural gas pipeline linking Karachi with Iran’s South Pars naturalgas field. Iran later proposed an extension of the pipeline into India. Once underway, notonly would Pakistan benefit from Iranian natural gas exports, but Pakistani territorywould be used as a transit route to export natural gas to India.The gas pipeline which is expected to be completed in 3-5 years will pump 60 millionstandard cubic meters of gas everyday to Pakistan where gas processing is still below 1trillion cubic feet a year, while energy starved India which currently produces half of thenatural gas it needs would receive 90 million standard cubic meters per day.The pipeline is proposed to start from Asaluyeh, South Pars stretching over 1,100 km inIran itself before entering Pakistan and traveling through Khuzdar, with one section of itgoing on to Karachi on the Arabian Sea cost, and the main section travelling on toMultan. From Multan the pipeline travels to Delhi where it ends. This project offers greatopportunities to Pakistan, as the gas pipeline will also set the course for possible oil andgas pipelines to China, as China in the past has expressed its willingness to bring oil andgas via Pakistan.Prime Minister Shaukat Aziz has termed the pipeline as “a win-win proposition for Iran,Pakistan and India” that could serve as a durable confidence building measure, creatingstrong economic business links among the three countries. But this win-win situation cansoon be seen in doldrums if the situation in Balochistan does not stabilise. In fact, a fewdays after Iran’s oil minister Bijan Namdar Zanganeh arrived in New Delhi to discuss thefuture of the pipelines, two gas pipelines were blown up in Balochistan sending tremorsto both Iran and India, that this “pipeline of peace” might be anything but peaceful.Initially, the Indian government was reluctant to enter into any agreement with Pakistandue to the historically tense relationship the two nuclear-neighbours have. But thepotential for economic and developmental gain from natural gas for India was too strongto hold back.After blessing India with a civil-nuclear deal recently, the US opposed the projectbecause of the financial and strategic benefits it would give to Iran, and prefers a pipelineproject, which supplies gas to India via Turkmenistan.The Bush administration has been blowing hot and cold on the issue, but by now it seemsevident that Washington would not want the IPI project to materialise. Pakistan and Indiaon the other hand are pressing ahead with the talks, albeit the three countries havefailed to reach an agreement on prices. Earlier this August, Iran offered a price of $8 permillion British thermal units (mBtu) to Pakistan and India, which was double of what theywere willing to pay (about $4.25 per mBtu). The initial pricing formula Iran hadforwarded hitherto linked the gas price to Brent Crude Oil with fixed escalating costcomponent (10 per cent of Brent Crude oil) of $1.2 per mBtu to the Pakistan-Iran border.The Iranian formula did not prescribe a floor and ceiling for the gas price either. Pakistanrejected the formula, to which India followed suit calling it “unacceptable”.A UK-based consulting firm Gaffney Cline was appointed by the mutual consent of allthree countries to facilitate them in setting a new price mechanism to sort out the issue.

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