P. 1
17 Generic Berthiaume Natural Gas

17 Generic Berthiaume Natural Gas

|Views: 126|Likes:
Published by AffNeg.Com

More info:

Published by: AffNeg.Com on Dec 21, 2008
Copyright:Attribution Non-commercial


Read on Scribd mobile: iPhone, iPad and Android.
download as DOC, PDF, TXT or read online from Scribd
See more
See less





IPI pipeline key for Pakistani economy

Shiv Kumar Verma, Political Geography Division, Center for International Politics, Organization and
Disarmament, School of International Studies, Jawaharlal Nehru University, New Delhi. 06-07. “Energy
geopolitics and Iran–Pakistan–India gas pipeline,” Energy Policy, Volume 35, Issue 6, pp. 3280-3301.

The latest positions in Indo-Pak ties clearly put economic factors on the front burner. [The IPI pipeline is likely to cost $7.4
billion mainly due to increase in steel prices. India estimates that the project cost may go to as high as $8.16 billion if there is a
10% escalation in raw material costs over the next 5 years when the project is slated for construction. The capex may come
down to $6.67 billion if there is a 10% decrease in raw material cost.] (Aiyar, 2005a). The real attraction is the US$5 billion
potential in trade through the proposed Iran–India gas pipeline traversing Pakistan. This pipeline is expected to save India
US$300 million a year in energy transport costs, while Pakistan would get an estimated US$700 million in annual transit fees.
However, the stake of Pakistan is very high, if the proposed project passes through Pakistan, as this project would have
enormous implication for Pakistani economy.
Pakistan's perennial foreign exchange crisis forced it to concede that it is in its
financial interest to get itself involved in the Indo-Iran gas pipeline project. The pipeline would accrue to Pakistan an
income of $14 billion in 30 years, including $8 billion in transit fee, $1 billion in taxes, and $5 billion in savings
Pandian, 2005 and Pandian, 2005).

Although the transit fee would not wholly redress Pakistan's acute foreign debt crisis, it would partly alleviate this
Finally, Pakistan, like India, suffers from a growing oil-pool deficit. Pakistan's power generation is heavily dependent
on fuel oil, and it is a net oil importer with an oil import bill of over US$1 billion/annum. The country aims to slash its imports
from the Gulf by one-third in order to save at least US$1 billion a year in its annual energy import bill. To reduce the fiscal
strain on the Pakistan's economy, the government has opted for a policy option of substituting fuel oil with natural gas for
power generation, a move expected to save an estimated US$600–700 million/annum. It is estimated that at current levels of
power generation, over 800 mfc/day of additional gas is required to replace fuel oil in all its thermal power plants (S.G.
Pandian, 2005 and Pandian, 2005). In this regard, Pakistan has concluded that it would be in its interest to provide inland
transit for the Indo-Iran pipeline project. Such a project, apart from offering an attractive fee for the pipeline to pass through
its territory, would also offer Pakistan the gas at subsidized rate as local gas comes at the rate of $3.4/million British
thermal unit (mbtu) against imported gas at $5
, the difference being is $1.6 mbtu. This difference would be met through
transit fee. Moreover, if gas import plans cannot be implemented and gas supplies remain limited to LNG imports in the next 5
years, the new thermal plants will be based on furnace oil with the provision that these could be switched over to gas at a later
stage. This will, however, put additional foreign exchange burden on the import of fuel. The policy has also clearly defined the
order of priority for all sectors for additional gas supplies. The policy has been prepared on the basis of an integrated analysis
of Wapda and KESC systems scheduled development of hydel, coal, and nuclear energy projects and expected low water
availability during dry period. This situation will remain intact even after materialization of 500 mmcfd (million cubic feet per
day) LNG import by 2010 and hence additional supplies would be diverted to other priority sectors. Moreover, CNG stations,
captive power and general industrial sector will start running short of gas from fiscal year 2015. Pakistan was meeting 18% of
its oil needs from local production and the country had to import the remaining 82% requirements for which it had to pay
international prices. The Pakistan government has incurred losses amounting to Rs. 66 billion by capping the prices over the
past year and would meet 50% of the expected Rs. 4 billion losses even after the new increases. However, Pakistan government
has increased oil prices 114 times in its six years. On the basis of comparative prices local cost of gas comes to $3.4/mBtu
against $5 for imported gas. Gasification of coal will make the cost $5.5/unit, while the cost of the high sulfur fuel oil comes to
about $7.5/unit; fuel oil will cost $8.1/unit, Naptha $ 1.4, and high-speed diesel $12.6/unit. See Table 2 and Table 3.


DDI 2008

Natural Gas Generic

Natural GasGe

Maggie & Co.

You're Reading a Free Preview

/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->